Construction industry costs soar due to supply shortages

March 5, 2024
Andrew Knowles

UK construction businesses are having to deal with costs rising at an exceptional rate. Some are describing it as hyper-inflation. Products such as timber, steel, cement and electrical items are seeing prices shoot up.

Several factors are driving the price increases. The pandemic is behind a lot of these, but it’s only part of the wider picture of supply issues that include environmental change and Brexit.

Reasons why construction costs are rising

Covid-19 pandemic

As Covid-19 swept around the world in 2020 it closed factory after factory. In the early days, some lockdowns effectively shut many businesses completely for a while. Even where a factory wasn’t closed, production was slowed by the pandemic hitting parts of its supply chain.

Shipping costs

A shortage in shipping capacity is creating delays and pushing up freight costs. One maritime consultant said that the cost of bringing a container from Asia to the UK was now five times higher than in mid-2020.

A shortfall in global shipping capacity and the number of available containers have been part of the problem. So too have delays in loading and unloading caused by new restrictions due to the pandemic, and new regulations resulting from Brexit.

There are also increasing problems with delivering construction products by road, due to a shortage of HGV drivers. Around 30,000 driver tests were postponed due to the pandemic. Brexit has also contributed, deterring some overseas drivers from working in the UK.

Rising demand 

In the UK the pandemic sparked a surge in domestic DIY projects, as people found themselves at home with time on their hands.

The Timber Trade Federation says that a massive increase in timber frame construction in the USA and Europe has contributed to the shortage of timber and timber products in the UK. 

Steel shortages are in part due to rising demand for steel in China, combined with a reduction in their exports.

Climate change

Milder winters and wetter summers are shortening the harvesting season in Scandinavian forests. Loggers need solid ground for their heavy harvesting equipment. The recent warmer, wetter years have led to much muddier conditions, which slows work considerably.

Supply of plastics has also been hit by changing weather patterns. A big winter freeze in Texas, in early 2021, shut down numerous chemical plants that play a vital role in the chemical supply chain that underpins plastic production.

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Construction products in short supply

  • Timber
  • Bagged cement
  • Roof tiles
  • Insulation board
  • Electrical products
  • Steel
  • Plastics

How your construction business can manage price rises

Stay in touch with trends

It pays to have an eye on what’s happening in your markets. It’s too easy to lose sight of what’s happening because you’re bogged down in the day-to-day tasks of running your construction business.

By paying attention to what’s going on in the wider industry you may be able to spot trends earlier, giving you time to prepare for changes.

Cashflow planning

Planning your cashflow is always a vital business activity, particularly at times like this. Sudden price rises in construction materials could put your cashflow under significant pressure. 

If you maintain a detailed cashflow plan, you’ll be able to spot potential shortfalls in working capital, and then take action to deal with them. 

Invoice finance

When cashflow is particularly tight, such as at times of fast-rising prices, you want fast, flexible access to cash. Invoice finance does that, enabling you to get paid within 24 hours of raising an invoice on your customer.

We help construction businesses keep their cash flowing 

If your construction business needs an injection of cash, either to help it keep going or to fund fresh growth, we can help.

Our clients benefit from invoice finance and other financial solutions that help them stay on top of their cashflow, even in times of rapid price inflation.

We work with a panel of over 250 lenders, meaning we can source financial solutions for a wide range of situations. 

To explore your opportunities for raising money for your construction business to improve your cashflow, get in touch with us today.

Jamie Davies
Managing Director

As a founder of multiple businesses, Jamie believes that mindset, discipline and ambition are key drivers for success, both for his businesses and for his clients. 

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