Price rises and materials shortages are causing disruption for construction firms throughout Northern Ireland. How is the industry responding?
There is no doubt about it, coronavirus and Brexit have combined to create the perfect storm for construction, with our industry in Northern Ireland particularly affected.
As we emerge from an unprecedented 16 months, pent-up demand is leading to a worldwide shortage in building materials and eye-watering increases in the costs of supplies.
For those in Northern Ireland, the latest Ulster Bank Purchasing Managers Index reported that the price of some materials here has risen by 400%. We were also recently alerted by one of our suppliers that the price of timber has risen by 50%. Overall, prices have risen somewhere between 10-15%.
When these price rises just land in your lap, they can obviously create extremely significant disruption.
‘One survey reports that 30% of companies are reporting risk to the survival of their business as a result of the materials shortages and unsustainable cost increases.’
Coupled with increases in cost, there are delays at the ports due to Brexit red tape which is having an impact on all construction projects receiving materials. These delays are being exacerbated as the shipping industry is still recovering from the pandemic and there is congestion on a number of shipping routes as well as issues around sourcing containers.
These issues have arisen at a time when contracts have already been drawn up, and so there is often no opportunity to recover the price increases from the client.
As a result, we’re very sympathetic to supply chains in NI, which are in an equally unpredictable situation. Our belief is that the industry comes out stronger by working closely together. We’re keeping in constant dialogue with our supply chain to help manage price rises and delays. We are all in the same situation, so a solution-based approach is going to benefit us all, whether that’s finding an alternative material, or simply having a sensitivity to the pressures that others are facing.
It’s a similar picture across the industry in Northern Ireland. The Construction Employers Federation (CEF) State of Trade Survey covering the first six months of 2021 paints a stark picture of the pressure companies are facing.
The survey reported that 30% of companies are reporting risk to the survival of their business as a result of the materials shortages and unsustainable cost increases.
This can make the tendering process especially difficult. A company could be in the position of tendering for a multi-million-pound contract for a project which may not start until next year and have little firm knowledge of what the next price rise will look like.
We expect the current situation to continue throughout 2021. There is no silver bullet unfortunately, it takes input from all areas of the industry along with careful forward and financial planning to mitigate these problems.
I’ve been greatly impressed by how our industry in Northern Ireland has rolled its sleeves up and worked together to respond to these challenges.
As an industry we have overcome incredibly difficult obstacles in the past, it’s how we adapt and face down these challenges as one that will get us through and help us come out stronger.
Ray Hutchinson is managing director of Gilbert-Ash, an award-winning construction and fit-out contractor with offices in London and Belfast