Building material price rises causes construction output to suffer third consecutive month of decline

A builder in a high-vis jacket moving building blocks
Building materials experience rising prices and declining availability, causing construction costs to rise by 4.5% which has resulted in a third consecutive month of decline for the construction sector (Image credit: Getty)

Construction output falls for the third consecutive month in May, according to the Office for National Statistics (ONS).

The ONS findings revealed there was a 0.4% drop,  mainly due to the decline in new projects as well as rising costs and limited product availability, 

The average cost of materials used in all types of work across the construction sector rose by 1.5% in May 2023 compared to the same month in the previous year, it was revealed.

This shows the continuing annual increase in product price rises as well as declining availability with brick deliveries experiencing a 29.7% decrease in deliveries in May 2023 compared to May 2022.

There was also a 20.0% decrease in concrete block deliveries in May 2023 compared to the same month last year, which has caused disruption to house building.

Here we take a look at the latest updates and statistics and how they can affect your project.

Increasing material costs and declining availability

The 1.5% year-on-year rise in construction costs has been explained by rising declining product availability and rising inflation.

This is according to the Building Materials and Components Statistics for May that shows the rising costs in the construction sector. After analysing the year-on-year changes, the cost to create new housing rose on average by 4.5% from May 2022 to May 2023 while repair and renovation work costs rose by 1.2%.

This follows increases in prices for screws (+32.8%), insulation materials (+28.8%) and ready-mixed concrete (18.7%). The sales of sand and gravel have also consistently remained below pre-recession levels, and the industry has faced recent drops due to the Covid-19 pandemic.

In May 2023, concrete block deliveries experienced a decline of 20% compared to May 2022, with brick deliveries also showing a significant decrease of 29.7% compared to May 2022.

Forterra, the largest brickmaker in the UK, put out a statement last week stating its profit predictions for 2023 were "overoptimistic" with reported revenue for the first half of 2023 predicted to be £183m, a decrease of 18% compared with 2022.

Forterra suggested production decisions would be influenced by demand with the company scaling back production as it reacts to the slowdown in housebuilding.

However, according to John Newcomb, CEO of the Builders Merchants Federation, and Peter Caplehorn, CEO of the Construction Products Association, Co-Chairs of the Construction Leadership's (CLC's) Product Availability working group the introduction of new brick manufacturing plants in the UK over the next 6-12 months will significantly reduce the country's reliance on expensive imports to replenish stocks in the future.

Construction materials experiencing the greatest price increases and decreases in the 12 months to April 2023, UK

Greatest price increases

  • Screws etc. +32.8%
  • Insulating materials (thermal or acoustic) +28.8%
  • Ready-mixed concrete 18.7%

Greatest price decreases

  • Imported, sawn, or planed wood -26.7%
  • Concrete reinforcing bars -26.0%
  • Fabricated structural steel -24.2%

Construction output declines 'significantly'

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Construction output has fallen for the third consecutive month (0.2%) according to the Office for National Statistics (ONS) construction output statistics for May 2023.

The decline in monthly production was exclusively driven by a decrease in new projects, which experienced a 0.4% decrease. Four out of the nine sectors experienced a decline in May 2023 with and private housing new projects experiencing one of the steepest declines of 1.7%.

However, the largest positive contributor to the overall performance was private housing repair and maintenance, which saw a significant increase of 3.9%, according to ONS figures.

It was also found in the Building Materials statistics that 20.9% of currently trading construction businesses reported a decrease in their turnover in April 2023 compared to March 2023. In contrast, 53.3% reported that their turnover remained the same, and 14.0% reported an increase in turnover.

When asked their expectations for the market, 9.4% of construction businesses anticipated a decrease in their turnover in June 2023. On the other hand, 57.4% expect their turnover to stay the same, and 18.5% anticipate an increase in turnover.

Additionally, 36.3% of currently trading construction businesses reported an increase in the prices of goods or services bought in April 2023, 19% of construction businesses anticipate they will be raising the prices of goods or services they sell, while 53.1% expect to keep prices the same.

Building materials on site

Government statistics show rising building and labour costs and shortages of raw materials which contributed to a 0.2% decline in construction output for May (Image credit: Getty Images)

How else could your project be affected?

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There is a reported lack of skilled workers in the sector after an ElectricalDirect study of 500 builders and tradespeople revealed a key concern among 25% of builders was the lack of skilled workers in their sectors. This is corroborated by the Office of National Statistics (ONS) who reported that 25% of construction businesses in the UK were experiencing skilled labour shortages.

There are roughly now 244,000 fewer workers in the construction sector compared to three years ago, the ONS says, attributable to workers returning to the EU and early retirees. And this shortage is particularly affecting SME builders since it can take a minimum of three years to train up a skilled tradesperson. 

The Federation of Master Builders (FMB) also reported difficulties in hiring skilled bricklayers and carpenters, and the shortage is seen as a factor in the rising cost of construction and wage increases, making it challenging for companies to remain competitive. 

The construction industry also faces obstacles in the planning process, with calls for increased funding to local authority planning departments and a simplified planning process.

Tim Balcon, CEO of the Construction Industry Training Board (CITB), claimed: "The greatest challenge UK construction faces over the next five years is recruiting the number of people required to fill the growing number of vacancies."

How to navigate price fluctuations

If you’re planning or in the middle of building work, then planning as far as you can in advance is pivotal to ensure you aren’t caught out by price rises.

The CLC advises self builders to work closely with their supply chain and communicate your requirements early with suppliers, distributors and builders merchants.  

Builder and Homebuilding & Renovating Show speaker and expert Andy Stevens offers the following advice: "There will be material price rises so you need to work closely with your builder and budget for these. 

"It’s so hard to predict accurately because of the volatility of the market, but make sure you work closely with your builder as we are in the merchants all the time and hear about price changes before anyone."

Joseph Mullane
News Editor

News Editor Joseph has previously written for Today’s Media and Chambers & Partners, focusing on news for conveyancers and industry professionals.  Joseph has just started his own self build project, building his own home on his family’s farm with planning permission for a timber frame, three-bedroom house in a one-acre field. The foundation work has already begun and he hopes to have the home built in the next year. Prior to this he renovated his family's home as well as doing several DIY projects, including installing a shower, building sheds, and livestock fences and shelters for the farm’s animals. Outside of homebuilding, Joseph loves rugby and has written for Rugby World, the world’s largest rugby magazine.

With contributions from