Materials inflation easing but more price hikes possible, says CLC 

The construction sector may face price hikes later in the spring despite a lull in material price inflation, industry leaders have warned.

The last month saw “good availability” for most construction products, with price volatility calming as the balance between demand and supply improved, according to the Construction Leadership Council’s product availability working group.

In its latest report, the group found that while demand has declined in recent months, work in every major construction sector – with the exception of commercial – remained above pre-pandemic levels.

Brick manufacturers have taken advantage of the slowdown to rebuild stock to its highest level in over two years, while the availability of gas boilers was up by more than a fifth in January compared with the previous year, as supply chains bounced back.

Timber supply also appears healthy, with “large stocks” of most grades of timber now available in the UK.

However, product availability and price issues are still the number-one operational challenge for wholesalers in the electro-technical sector, as they continue to face longer lead times for solar products such as inverters, batteries and mounting systems.

Problems in the supply and pricing of EV chargers, which are linked to regulatory changes that came into force in December, remain a “major concern”, the group added.

Co-chairs John Newcomb, chief executive of the Builders Merchants Federation, and Construction Products Association chief executive Peter Caplehorn said price inflation had “largely stabilised”, with some suppliers deferring price increases as demand slowed.

Gas prices showed signs of easing and many larger energy intensive manufacturers are thought to have hedged a high proportion of their energy costs for the year ahead.

“Nonetheless, the impact on manufacturers from high energy costs often takes months to feed through to product prices – especially for energy-intensive products and materials – so the volatility from late 2022 may still be felt into the spring,” they said.

“Inflationary pressures on other costs, especially labour, continue and may well impact prices later in the year.”

The group is also monitoring potential supply chain disruption following the earthquake in Turkey.

An Office for National Statistics analysis published last week showed that rising inflation added £23bn to the cost of the construction sector’s output in 2022, while consultants Linesight predicted that construction commodity prices are likely to remain high.