Statement from John Newcomb, CEO of the Builders Merchants Federation and Peter Caplehorn, CEO of the Construction Products Association, co-chairs of the Construction Leadership Council’s Product Availability working group
Activity in the UK construction sector, already high at the start of the year, has been very robust and picked up sharply from the beginning of March. New housing and repair, maintenance and improvement (RMI), together with infrastructure, have led the way. We now also see increasingly strong performance in the commercial and industrial sub-sectors, applying further strain on the supply chain.
Back in March we warned that product availability would worsen before it improved. This is proving to be the case; projections indicate that strong demand will continue over the next six months. This mirrors similar projections worldwide, as major economies such as China, the US and the EU surge following lockdowns.
In fact, most of the shortages of products and raw materials impacting the market have been driven by both global and domestic supply and demand factors. Previously reported issues relating to timber, steel, pitched roofing, plastics and paints/coatings continue. Growing areas of concern, however, include certain electronic components and bagged cement.
Earlier this month British Steel advised that it had temporarily stopped taking orders for structural steel sections, though other products were unaffected. We understand this is likely to be a short-term interruption to work through a backlog of orders. Production and related operations continue at full capacity, but the global demand for steel remains extremely high.
In addition to availability and resulting longer lead times, there is an impact on prices. The Office for National Statistics projects a rise of 7-8% in material prices, with increases for certain materials, such as timber, expected to more than double during the course of the year.
New rules on hauliers have exacerbated the shortage of drivers in the UK, which is another contributing factor adding to delays and lead times not only in the construction industry but many other sectors as well.
There is evidence that those who can buy in advance and in large quantities are having fewer problems at present than SME builders who are used to buying the products they need that day from their local merchant. The surge in demand means some SME builders are not able to purchase essential materials, like timber, cement and roof tiles, as readily off the shelves. This not only impacts their ability to complete projects, but also the cash flow of their business.
The Construction Leadership Council stresses that wherever possible the industry must work collaboratively to manage this unprecedented situation to everyone’s benefit. This could include:
- Where products are in short supply, any allocation systems should be as transparent as possible so all customers can be seen to be treated fairly.
- The accuracy and timeliness of communications will reduce current frustrations. For example, customers should not over-order unnecessarily, while manufacturers should not promise delivery dates that cannot be achieved, only to cancel at short notice.
- Where relevant, the production for major projects – which is typically scheduled well in advance – should not be seen to adversely affect volumes available for smaller, regular customers.
The unprecedented levels of demand, both in the UK and globally, is set to continue for the foreseeable future, placing the importance of forward planning and communication front and centre. Only by working positively together can we endeavour to provide customers with the products and solutions they require to complete projects in a timely manner.
Colleagues in affected material areas have published detailed updates in order to keep the market informed. These can be accessed at the following links.