More than half of small building firms in the UK say that rising material prices are squeezing their margins and they are having to pass these price increases onto consumers, new research has found.
In means that home owners face bigger bill for work done on their properties and a longer wait as the supply of materials such as bricks and tiles is falling, according to the latest study by the Federation of Master Builders (FMB).
Staples such as bricks are in short supply with the longest reported wait time being more than a year, followed by roof tiles with a waiting time of up to six months and a four month wait for insulation.
Builders also report waiting up to six months for slate, a year for windows, four months for blocks, a year for porcelain products, two months for plasterboard, two months for timber and more than a year for boilers.
The biggest increase for materials has been for insulation with a rise of 16%, followed by bricks up 9% and timber, roof tiles and slate all up 8%. Prices of windows, blocks, plasterboard and boilers have climbed by 7% and porcelain products up by 6%.
As a result some 56% of small and medium sized builders say they have had their margins squeezed, up substantially from 32% in July 2017. The research also shows that 49% of firms have been forced to pass material price increases onto their clients, making building projects more expensive, up from 22% when the last study was done in July 2017.
Some 30% of firms have recommended that clients use alternative materials or products to those originally specified, up from one in 10 in July 2017 and 17% of builders report making losses on their building projects due to material price increases, up from one in 10 in the previous study.
The reasons behind material prices rising so much could include the impact of the depreciation of sterling following the European Union referendum still feeding through, according to Brian Berry, chief executive of the FMB, along with high demand due to buoyant international markets.
‘What’s particularly worrying is that when prices have increased mid-project, almost one fifth of builders have absorbed the increase and therefore made a loss. Also, if material price increases weren’t enough of a headache for building firms, they are also experiencing material shortages with wait times ticking up across a range of materials and products. Worst case scenarios include firms waiting for more than one year for a new order of bricks,’ said Berry.
‘The rise in material prices is not just a problem for the country’s construction firms, it is also a problem for home owners. Half of firms have been forced to pass these price increases onto their clients, meaning building projects are becoming more and more expensive. This problem has worsened recently with more than twice as many firms passing material prices on to their clients now compared with nine months ago,’ he pointed out.
‘What’s more, home owners should be prepared to have to use alternative materials or products to their first choice. One third of firms have recommended that their clients should use alternative materials or products to those originally specified. Now more than ever, it’s important that builders and their clients keep the lines of communication open in order to stay within time and within budget. Specified products or materials may need to be swapped for alternatives or clients will need to accept the additional cost,’ he explained.
The FMB’s latest state of the trade survey shows that almost 90% of building firms are expecting further rises over the next sixth months. ‘This makes quoting for jobs difficult but if builders flag the issue to their client from the outset, and include a note in the contract that prices may be subject to increases, they shouldn’t be left short,’ said Berry.
‘What we don’t want is for the number of building firms making losses on projects to increase as this could result in firms going to the wall. A large number of collapsing construction companies will have a terrible knock-on effect in the wider economy,’ he added.
