Building recovery threatened by rising costs, say firms


Russell Lynch
Sunday 17 August 2014 21:48

Rising costs are putting recovery at risk as the building industry comes up against severe skills shortages and soaring material prices, the industry warns today.

Construction – which accounts for around 6 per cent of the total economy – was badly hit by the recession but has seen a rapid expansion in the past year as the Chancellor’s Help to Buy scheme spurs housebuilding activity.

The majority of the building industry expects stronger growth over the next 18 months, according to industry trade bodies, but the cost of tendering work is rising as builders adjust to the new realities of shortages of both materials and skills.

Overall, four in every five building firms reported rising costs over the past year, with 95 per cent paying higher materials prices and three-quarters seeing higher labour costs. Nearly half of firms found bricklayers and carpenters were difficult to recruit.

Richard Beresford, chief executive of the National Federation of Builders, added: “The good news is construction output is rising. However, higher tender prices, materials and labour costs and difficulty in securing skilled labour at reasonable cost all highlight the fragility of this recovery.”

The boss of Michelmersh Brick, the UK’s largest listed manufacturer, recently described stocks as being at “their lowest in living memory” while prices have soared by up to 20 per cent since January in some areas of the country. Imports are up 60 per cent to fill the gap.

Noble Francis, economics director of the Construction Products Association, said: “Many major contractors are still working on projects won in 2013 at relatively low prices but have been suffering from the key concerns of rising costs and skills availability, especially in specific sectors such as private new housing.”

Separately, Rightmove today reports that asking prices of property coming to market this month are down by the biggest percentage ever recorded in August. Average asking prices were down 2.9 per cent, or £7,758, in the month according to the online estate agent portal. Rightmove said asking prices traditionallty drop by 1.6 per cent in August.

An agent in London reported that specultion over the timing of interest rate rises by the Bank of England had also had an impact on sentimement, with London buyers not wanting to find themselves “hamstrung by rates going up”.

The survey is the latest indication that housing market momentum may be slowing.

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