Why are prices rising?

At the peak of the pandemic, material production slowed while demand increased as homeowners embarked on improvement projects during lockdown.

The supply chain crisis in 2021 that led to skyrocketing prices and huge lead times on materials look to be easing today but some key products remain in short supply.

The FMB says material shortages and skills shortages still plague the sector causing project delays.  Some 73% of builders have delayed work because of lack of materials while 55% have put projects on hold as they struggle to recruit skilled trades like carpenters/joiners and bricklayers.

Brexit is a factor. New regulations and delayed shipments mean materials from overseas are harder to come by. EU construction workers returning to the continent have contributed to labour shortages.

Brian Berry, chief executive of the FMB said:  “Construction as a whole is on the up year on year, but local builders continue to operate in an extremely challenging environment, facing difficulties in sourcing affordable materials and labour.  

“Faced with rampant inflationary pressures and significant uncertainty regarding the economic impact of the war in Ukraine, smaller building firms look set to suffer at a time when consumers are tightening their belts.”

Architects have also been hugely affected. The price hikes are making it challenging for architects to budget and a restricted range of products is making sustainable design more difficult, according to a RIBA analysis.

Plan ahead for price rises and material shortages

Before the pandemic, prices of materials and labour were relatively stable in the UK. With prices today being so volatile, builders are no longer prepared to offer ‘fixed price’ contracts where they bear the risk for any changes in expenditure. “That’s because any increase in material costs would cut into their profit margins,” said architect Scot Masker, founder of Masker Architects. “They will usually add a caveat (to the contract) that if material prices go up, they will have to charge the client more.”

Masker added: “I have already had that happen on a couple of projects where the builder quoted for the work but said they can’t guarantee that price because the cost of materials, such as steel, may go up between negotiating the contract and work starting on site.”

Masker said the contract should only allow fluctuations for specific materials which are at higher risk of price changes, such as steel and timber. Before giving the go-ahead to work ask your building contractor how long the quote stands for and how they will manage any price rises.  Always have a written contract. Check it includes labour rates, material costs and any price fluctuation clauses and get it signed off before work starts.

If your project isn’t due to start for a few months, it may be worth buying materials in advance to store on site if practical or for warehousing to be set aside to avoid future price hikes.  Materials need to be kept somewhere secure as thefts become more common as prices increase. Ordering in advance will also help avoid delays if there is a looming shortage of certain materials, like bricks. If materials need to be bought in advance by the builder, it is reasonable that they may ask for a deposit or percentage of the cost before work starts.

Another way to safeguard against rising costs is to increase your contingency. Before starting your project, it is recommended to set aside a contingency fund. Typically, 5 to 10% of the construction budget should be allocated to your contingency budget but you might want to increase that sum. Think of it as insurance to help you manage price rises as well as any extra costs. Otherwise, a dramatic price rise in construction materials could blow your budget.   

Choose a good builder

Start planning and obtain at least three quotes to compare from local building contractors as soon possible either by using this website or by asking friends and family for recommendations.  Reputable tradespeople are often booked months in advance.

Be aware rocketing prices and high demand have created the perfect conditions for cowboy builders to take advantage of homeowners looking to save money. Don’t just choose the cheapest quote.  Weed out rogue traders by asking for proof of a trade body membership, such as the Federation of Master Builders. Check references and insurances, read reviews and, if possible, visit previous jobs.

There is no perfect way to deal with building price rises but, as always, good communication with your builder and suppliers is vital to prevent budget overruns, delays and disputes.

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