A fairly upbeat picture emerged from this month’s meeting of the Construction Leadership Council’s Product Availability working group, helped by a better than expected forecast from the Office of Budget Responsibility with the UK predicted to avoid recession and inflation predicted to fall from 10% to 3% over the course of the year.
In line with this, construction activity in the first quarter has been higher than predicted in Q4 2022.
While housebuilders do not anticipate 2023 sales will reach 2022 levels, consumer confidence is holding, aided by an easing of interest rates for 5 year fixed rate mortgages, and new build reservations and sales have improved against Q4 2022.
Despite higher than expected demand, there is good availability for the vast majority of building products. The one exception is plasterboard, which is currently on allocation but with measures in place to increase capacity this is unlikely to be a long term issue.
John Newcomb, CEO of the Builders Merchants Federation and Peter Caplehorn, CEO of the Construction Products Association, co-chairs of the working group, said: “Longer standing issues with bricks, blocks and boilers appear to be resolved. UK brickmakers have made significant investments in increased production, with the first new line coming on stream later this year adding over 185 million more bricks a year. Boiler volumes have also returned to normal levels, backlogs have been cleared and no further problems are foreseen.
“The electro-technical sector continues to experience delays in the delivery of solar PV equipment and LED lighting which remain affected by the supply of semi-conductors.
“Although wholesale gas prices are now falling, the price of energy intensive products such as bricks is unlikely to reflect this for some time as manufacturers hedged their gas prices last autumn. Manufacturers are also subject to other inflationary pressures including staffing and materials.
“Timber prices, however, have now returned to around pre-Covid levels. We have also seen reductions for structural steel and rebar during the first quarter of 2023.
“That said, price inflation remains the number one issue. While prices are not rising as quickly as they have been, they are still substantially higher than 18 months ago and profit margins are being squeezed. This is particularly concerning for SME builders and regional house-builders. There are also isolated reports of credit risk insurance being withdrawn, which we will continue to monitor.”
