Rising costs are continuing to affect the UK’s construction industry, with wage inflation expected to overtake material supply as the sector’s biggest issue in 2023.
Material costs remain volatile
This year has already seen increasing materials costs cause problems for projects, along with dramatic fuel price increases. According to the latest report from the Construction Leadership Council (CLC), this year, inflation for construction products and materials has hit 23%.
While materials that were previously experiencing shortages are now more readily available, continually rising energy prices are keeping costs up. The CLC has also warned that further inflation is to be expected, especially when it comes to energy-intensive products, such as concrete, insulation, cement, and steel.
Skills gap leading to wage inflation
However, with the skills gap continuing to grow, wages are also set to see increases that could impact construction projects over the next few years.
Earlier this year, the Office for National Statistics (ONS) revealed that workers were being paid higher non-seasonally adjusted bonuses than in 2021, representing an 82% year-on-year increase. Construction firms are also having to increasingly offer additional incentives in a bid to retain staff as crippling labour shortages continue to cause issues.
The ONS also found that an average of 49,000 jobs in the sector were left unfulfilled between February and April this year, a record for the industry.
This supports the CLC’s latest report findings, which state: “There is now clear evidence that skills shortages are making some SME builders reluctant to take on projects, as they don’t have the traders to complete the work.
“Recruitment, retention and related wage inflation continue to present serious concerns across the UK construction industry and may supplant product availability issues in 2023 among key risks facing the industry.”
According to the CLC, there are now concerns that increasing and volatile inflation has resulted in a failure of relevant indices to reflect market reality, which could affect estimates and budgets. The result is that many contractors are now talking to clients about using prime cost, provisional sums, and target-based contract mechanisms to mitigate the risks of inflation impacting current and future projects.
Martin Sudweeks, UK Managing Director for Cost Management at consultant, T&T, said: “With inflation expected to increase across all major UK markets this year, businesses will need to focus on careful planning, ensuring contracts are pragmatically developed to take into account potential price rises and, where necessary, to share risk in a balanced way.”
How can construction cost consultants help?
Planning for current and potential future cost increases is key during the early stages of any construction project, while adjusting costs for rising inflation when it comes to ongoing projects is also vital. Construction cost consultants can help you do this.
Whether your project is in the planning stages or is underway, we can help you improve plans and estimates, reduce current costs, analyse and negotiate contract amendments and support you with expert industry advice to minimise future issues.
Our goal is to ensure that each of your projects is profitable, which means reducing delays and addressing any problems that could damage your returns. The result is smooth-running projects that help your business grow, despite the challenges affecting the industry.
To achieve this, all of our processes are tailored to you and your needs, giving you the right level of support throughout the life of your project. Contact us today on 020 7096 8235 or email us at email@example.com to find out how we can help you meet the current challenges being faced by the UK construction industry.