Material shortage biggest risk to recovery warns Wakemans
The construction industry is improving with many commentators reporting that the sector is booming but national property and construction consultants Wakemans has warned that severe material shortages could slow down the pace of the recovery.
According to Wakemans director Adrian Aston, it is the residential sector that is growing fastest and this is creating demand for vital materials leading to shortages in other sectors.
“When the recession has been as long and hard as the one we have just experienced, it takes time for the industry to have the necessary resources in place to fuel the recovery. Many manufacturers laid off staff and reduced production in the downturn and are now unable to meet the needs of the burgeoning housing sector.
“Essentials such as bricks are now on lead time of up to eighteen weeks, four times as much as would normally be expected. Whilst other materials such as steel are easier to come by, the nature of the building process is such that delays are still being experienced to the overall project.
“In addition to the delays, shortages are causing prices to rise for materials and labour. Rates charged by subcontractors have been rising all summer and prices paid for construction materials are also increasing sharply.”
“Sectors other than housing are not so buoyant and these issue are having a further negative impact. Commercial construction is increasing year on year across the UK but the rate of increase is small and the rise is coming from the South East with the regions falling. Developers are more confident as the economy improves but there are many factors hampering a full recovery, with lack of finance still a major barrier.”
“Latest statistics for construction output are actually reporting a slowdown in growth and this could be the first signs that the recovery is still very fragile,” warns Aston.
Figures from the Office of National Statistics (ONS) in August reported that there was no growth between Q1 2014 and the second quarter, although when compared to the same quarter in 2013 output had risen by 4.8%. New housing grew by 3.5% when comparing Q1 with Q2 in 2014, reaching its highest level since the final quarter of 2007.
“The general election next year may help as the government will want to ensure that the housing bubble does not burst and manage the growth at a reasonable level. There are also a number of major infrastructure projects, such as HS2 that should provide more confidence for a wider range of developments to follow.
“However, we also have new legislation, Part L of the building regulations, which came into force in April this year. All new non-domestic buildings now have to be 9% more efficient in terms of their carbon emissions, and it is too early to tell if this will push up prices.
“Our advice to those that are building is to take care to ensure that the tender documentation is as complete and as comprehensive as possible, with adequate periods allocated so that tenders receive the necessary attention and the appraisal can be properly carried out.
”The most common reason for tenders to be returned over budget is because of lack of clarity in some areas, resulting in the contractor pushing up prices to cover risk. Reducing uncertainty and increasing accuracy will mitigate this risk and help to avoid any further delays.”