Inflation is impacting everyone in so many areas. Just take a trip to your local petrol station to see the immediate effect inflation is having. There’s no way of tip-toeing around it. Building costs are rising too. And it’s affecting Birmingham’s homegrown developers, including us.
As a Birmingham-based developer, we understand that these changes are affecting our local community and we want to understand more about why the costs are rising and what rising costs look like for our business and clients. We must do our best to adapt to the high cost of living and be prepared for change. The investment monitor reported that the cost of raw materials in the UK is expected to be more than treble in 2022.
Why are building costs rising so quickly?
In the past two years, construction material costs have worried in the UK. There are a variety of factors that have caused this rise, including a worldwide pandemic that no one was prepared for. Difficult market conditions were experienced across global markets with stretched supply chains and staff shortages common in almost every sector. This has triggered a rise in costs across the market, with the construction industry being hit particularly hard. The building industry saw a spike in demand as people worked from home and wanted extensions or office space buildings. An inability to build adequate stock levels caused prices to soar. Raconteur reported that prices for all building work rose by 24.5% from March 2021 to March 2022.
The crippling Materials Shortage
Inflation is affecting Birmingham’s homegrown developers as they simply cannot get the materials to build. Even as costs have increased, the supply simply could not meet the demand. The raw materials that are needed to continue developing in Birmingham are not only harder to hold, but more expensive.
- The average price of sawn and planned softwood in May, June and July rose by 55%, 65% and 88% respectively over their corresponding months in 2020.
- structural steel prices have now risen by £260 per tonne since July 2020. 2021 saw seven price hikes lifting the price of steel by around £340 a tonne.
- The Birmingham-based company Jaguar Land Rover suffered for several months due to a shortage of microchips that affected the car industry.
- The shortage of HGV drivers and labor has caused unprecedented delays in the construction and building industry.
- In the concrete sector, rebar prices are also rising.
- We will likely see a shortage of supply in:
- Plastic products
- Ceramic tiles and sanitaryware
- Lighting and fire protection systems
The War in Ukraine
In February 2022, the world watched in horror as Russia invaded Ukraine. The supply chain was already facing uncertainty and the ongoing conflict has only intensified this. With many countries putting sanctions in place and putting forward plans to reduce country reliability for their supply of gas and other imports, gas prices rose even further. This added even more pressure to the construction industry with many supply chains blocked.
The Ripple Effect of the Rising Cost of Petrol and Diesel
Triggered by the war in Ukraine, fuel prices have risen dramatically in recent months. In April 2020, oil barrels fell to their lowest price since 2002 thanks to an oversupply of oil and rapid build-up of stocks due to the pandemic, but there have been dramatic rises since then. As we fill up our vehicles it’s hard not to think about how this is impacting not only the public but businesses too. The high price of fuel means that shipping, transportation, and delivery costs have risen. For UK construction companies who buy supplies from overseas to supply our developments, this has meant some of these costs are being passed on to the consumer.
The Energy Crisis
The energy price cap in April 2022 meant a sharp increase in bills for households and businesses. With another rise planned for October, many lower-income families are having to make the heart-breaking choice between heating their homes and feeding their families.
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