More than half of
small building firms say that rising material prices are squeezing their
margins and the same percentage have had to pass these price increases onto
consumers, according to the latest research by the Federation of Master
Builders (FMB).
Small and medium-sized
(SME) building firms were asked which materials are in shortest supply and have
the longest wait times. The average results were as follows (in order of
longest to shortest wait times):
1) Bricks were in
shortest supply with the longest reported wait time being more than one year;
2) Roof tiles were
second with the longest reported wait time being up to six months;
3) Insulation was
third with the longest reported wait time being up to four months;
4) Slate was fourth
with the longest reported wait time being up to six months;
5) Windows were fifth
with the longest reported wait time being more than one year;
6) Blocks were sixth
with the longest reported wait time being up to four months;
7) Porcelain products
were seventh with the longest reported wait time being more than one year;
8) Plasterboard was
eighth with the longest reported wait time being up to two months;
9) Timber was ninth
with the longest reported wait time being up to two months;
10) Boilers were
tenth, with the longest reported wait time being more than one year.
SME building firms
were also asked by what percentage different materials have increased over the
past 12 months. On average, the following rises were reported:
• Insulation increased
by 16%;
• Bricks increased by
9%;
• Timber increased by
8%;
• Roof tiles increased
by 8%;
• Slate increased by
8%;
• Windows increased by
7%;
• Blocks increased by
7%;
• Plasterboard
increased by 7%;
• Boilers increased by
7%;
• Porcelain products
increased by 6%.
The impact of these
material price increases includes:
• More than half of
construction SMEs (56%) have had their margins squeezed, this has gone up from
one third (32%) reporting this in July 2017;
• Half of firms (49%)
have been forced to pass material price increases onto their clients, making
building projects more expensive for consumers, this has gone up from less than
one quarter (22%) reporting this in July 2017;
• A third of firms
(30%) have recommended that clients use alternative materials or products to
those originally specified, this has gone up from one in ten reporting this in
July 2017;
• Nearly one fifth
(17%) of builders report making losses on their building projects due to
material price increases, this has gone up from one in ten reporting this in
July 2017.
Brian Berry, Chief Executive of the FMB, said: “Material prices have rocketed over the past
year. The reason for this could include the impact of the depreciation of
sterling following the EU referendum still feeding through.
"High demand due
to buoyant international markets could also be contributing to price increases.
What’s particularly worrying is that when prices have increased mid-project,
almost one fifth of builders have absorbed the increase and therefore made a
loss. Also, if material price increases weren’t enough of a headache for
building firms, they are also experiencing material shortages with wait times
ticking up across a range of materials and products. Worst case scenarios
include firms waiting for more than one year for a new order of bricks.”
Berry continued: “The
rise in material prices is not just a problem for the country’s construction
firms – it is also a problem for home owners.
"Half of firms
have been forced to pass these price increases onto their clients, meaning
building projects are becoming more and more expensive. This problem has
worsened recently with more than twice as many firms passing material prices on
to their clients now compared with nine months ago. What’s more, home owners
should be prepared to have to use alternative materials or products to their
first choice.
"One third of
firms have recommended that their clients should use alternative materials or
products to those originally specified. Now more than ever, it’s important that
builders and their clients keep the lines of communication open in order to stay
within time and within budget. Specified products or materials may need to be
swapped for alternatives or clients will need to accept the additional cost.”
Berry concluded: “We
are calling on builders merchants to give their customers as much advance
warning of forthcoming material price increases or wait times as possible
so that firms can warn their customers and plan ahead. We are also advising
builders to price jobs and draft contracts with these material price rises in
mind.
"The FMB’s latest
State of Trade Survey shows that almost ninety per cent of building firms are
expecting further rises over the next sixth months. This makes quoting for jobs
difficult but if builders flag the issue to their client from the outset, and
include a note in the contract that prices may be subject to increases, they
shouldn’t be left short.
"What we don’t
want is for the number of building firms making losses on projects to increase
as this could result in firms going to the wall.
"A large number
of collapsing construction companies will have a terrible knock-on effect in
the wider economy.”
