Construction product prices rise by a fifth, CLC warns

Construction material prices have soared by more than a fifth since the start of this year, according to the Construction Leadership Council (CLC), which has warned of further “significant” rises to key products in 2022.

Average inflation for products so far this year has reached 23 per cent, the CLC said, with energy-intensive products such as insulation, cement, concrete and many steel products rising further. It warned that the speed and severity of the cost rises meant that price indices were arguably irrelevant.

However, it stated that the acute supply crunch experienced in 2021 had, for the most part, been solved.

The CLC said: In general, product availability is improving. Some products […] remain on allocation or subject to longer lead times. Otherwise, manufacturers are mostly keeping up with demand and, as stated in our last report, the market has become adept at managing supply with planned delivery times.

The organisation added that it was anticipating further price increases for products in the second half of the year, owing to further rises in energy prices and input costs.

It also warned that the skills shortage, combined with product price rises, was putting off SME contractors from bidding for work.

But, the CLC said a number of key products have stabilised, such as timber, which has seen low price growth this year, largely due to easing demand and strong stocks of structural timber on the ground in the UK.

In a statement, CLC co-chairs John Newcomb and Peter Caplehorn said: “Concerns have arisen that volatile inflation has led to the failure of relevant indices to reflect market reality. Some contractors are engaging in dialogue to use prime cost, provisional sums and target price-based contract mechanisms to mitigate the risks […]

“Recruitment, retention and related wage inflation continue to present serious concerns across UK construction, and may supplant product availability issues in 2023, among the key risks facing the industry.”

Last week, Mace group chairman and chief executive Mark Reynolds was named as a co-chair of the CLC.

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