Inflation Destroying Construction Confidence

Gleeds’ winter market report has revealed that nearly nine in ten construction professionals are concerned about rising inflation sapping confidence in the market and threatening future schemes. 87% of respondents to the international property and construction consultancy’s most recent survey said that inflation was having an impact on the viability of projects, with just under 70% believing that the current challenges are impacting growth of the construction industry.

Contractors rated a lack of investor confidence and materials and labour cost escalation as the greatest threats to the industry. As a result, 67% of those quizzed expressed concern that ongoing economic pressure will also negatively impact the industry’s drive toward net zero, while 60% were worried that it will influence the pursuit of greater diversity in the built environment.

More positively, the report did reveal an improvement in the availability of products and materials, with 76% noting a settling of long-term supply issues. Over half of those questioned also found that materials prices over the same period were beginning to flatten, compared to just 32% in Q3. Labour availability continues to be a problem however, with 65% experiencing issues and a massive 88% reporting increases to worker’s rates.

Speaking about the findings of the report, Gleeds CEO Graham Harle said, “It’s heartening to see that the squeeze on materials is beginning to ease and that collaboration across the supply chain has continued, however the fact that sustainability and diversity targets may be suffering as a result of continued economic pressures is a concern. Threats to viability are worrying, but opportunities do remain for some sectors and a considerable proportion of respondents were of the view that a slow down in the industry may actually go some way to stabilising the industry after a turbulent couple of years. Only time will tell.“

Asked about the impact of the chancellor’s Autumn Statement, only 3% of respondents said that it had been worse than expected with regards to the construction industry. Despite rumours that the government was re-evaluating and planning to cut major projects to tackle the deficit, pledges included more than £600 billion of capital spending over the next five years for schemes including HS2, Northern Powerhouse Rail, East-West Rail, and the New Hospitals Programme. However, significant pressures remain for departmental capital spending, which will be “maintained in cash terms until 2027/28”, meaning the squeezing of budgets.