The government figures show that over the past two years, the cost of building materials has increased dramatically in price.
The main reasons include the war in Ukraine which has limited the supply of raw materials, as well as the huge increase in the cost of the energy needed to produce materials. And with Andrew Bailey, the governor of the Bank of England asking companies to show restraint in passing rising costs on to customers, the UK construction industry is facing real pressure.
The government’s Construction Material Price Index showed the cost of raw materials increased by almost a fifth over the past year – the largest annual rise since 2015.
At the end of 2022, the stock level of the typical ‘common’ brick used in the UK construction industry stood at 19 million – over 50 per cent lower than the 39 million bricks which were available pre-pandemic.
Impact on house building levels
Although construction output in the UK jumped by 2.4 per cent in February giving the sector a record £15bn boost, this was due to an increase in private housing repair and maintenance rather than new homes being built.
Figures from the Office for National Statistics report a mixed picture across work sectors — for example, new commercial housing projects saw a 4.4 per cent fall, continuing the trend of not enough housing being built.
The outlook for housebuilding is less optimistic, given that March was the wettest for 40 years which will have impacted site work. According to industry figures, housebuilding starts fell by 39 per cent in the first three months of this year compared to the final quarter of 2022.
The continued rise in the cost has impacted house building levels in the UK.
The Royal Institution of Chartered Surveyors (RICS) conducted a survey just before the pandemic which revealed that cost was a concern for housebuilders, with 80 per cent of respondents naming it as an obstacle to new housebuilding. This has led to an increase in the cost of construction, making it difficult for some developers to build affordable homes.
Skills and labour shortage
There has also been an impact on the level of apprenticeships in the construction industry. According to the Construction Industry Training Board (CITB), the number of new apprenticeship starts has declined over the past decade.
In 2011/12, there were 28,850 apprenticeship starts, compared to 18,830 in 2018/19, a decline of 35 per cent.
The high costs have also made it difficult for companies to invest in training and development, further impacting the labour shortage.
According to the Federation of Master Builders (FMB) many small and medium-sized construction firms are still struggling to hire skilled bricklayers and carpenters. This is another factor in the rising cost of construction and is leading to an increase in wages, making it difficult for companies to remain competitive.
Despite the recent announcement by the government that bricklayers, roofers, carpenters, and plasterers will be added to the Shortage Occupation List from this summer meaning the skills gap will be partially plugged, industry commentators say this doesn’t go far enough and should include additional professions such as electricians.
It’s estimated that building over 300,000 homes a year would generate £14.2bn in economic output. The benefit to the country is clear and yet a shortage of skills at technical, supervisory, and managerial levels is holding construction back.
The CITB’s report ‘The skills construction needs – a five-year outlook’ showed that the construction industry will need 266,000 new workers over the next five years simply to meet current housing demand.
The shortage of skilled labour is also impacting the quality of construction work in the UK. According to a survey conducted by the Chartered Institute of Building (CIOB), 91 per cent of construction professionals believe this to be true.
Industry will prevail
But the industry is not standing still and has been very active in trying to address these issues.
Trade bodies such as the FMB and CITB are calling on the government to support the industry. The FMB has called for incentives for small and medium-sized construction firms to invest in training and development, while the CITB is calling for increased funding for apprenticeships and training programmes.
There is little doubt that the sudden increase in the cost of building materials over the past few years coupled with the acute skills shortage, has been a contributory factor on the number of new homes currently being built in the UK.
However, as Leeds Building Society pointed out last November, the government needs to work more closely with the construction industry to invest in education and skills training. It is also imperative that it supports small and medium-sized housebuilders who already provide over 70 per cent of apprenticeships.
It is only by working together that the issues the housing market currently faces can be addressed so that the hopes and aspirations of millions of prospective young homeowners to get a foothold onto the housing ladder can be fulfilled.
