Britain needs buildings more than ever. As such, confidence within the sector is sky high. However, does the current state of our supply chains pose a risk to us capitalising on growth? Buildingspecifier’s Editor Joe Bradbury investigates:
According to IHS Markit/CIPS, output growth has risen in line with increased commercial, domestic and civil engineering projects. These works have largely come in the form of restarting delayed projects, critically around office development, leisure and hospitality.
Residential new build has also experienced a significant boost, alongside domestic renovation, with higher spends reported in both areas of the industry.
Output among private sector housebuilders has surged by nearly 141 per cent since its low point 12 months ago. Infrastructure work has also long since soared past its pre-pandemic level. Whilst government statisticians have confirmed that 2020 was the worst year on record for UK construction, that milestone is now thankfully behind us as contractors and their suppliers continue to gear up for a sustained surge of demand throughout the course of 2021.
This great surge in demand is great news, but like all great waves it brings with it a degree of risk.
Higher demand for construction and trade services has a real-world trickle down to small and medium trade businesses. This, coupled with the current stresses on the UK supply chain in the wake of Covid and Brexit, is cause for concern.
When lockdown struck Britain in March of last year, the material supply lines for the whole of the UK were put on pause for a number of weeks. As we scrambled about creating toilet paper and flour shortages for one another, similar panicked antics afflicted the construction industry.
The delays caused in the initial weeks of lockdown resulted in a shortage of plasterboard, cement and many other essential construction materials. Subsequently, this has resulted in price increases for these products as availability decreased.
We can’t just lay the blame at the door of COVID-19 for these short-term supply constraints. Brexit laid the groundworks for disaster.
Before COVID there was Brexit…
I believe that people should be wary of forming too strong an opinion on the decision to leave the EU, because a) it has resulted in both good and bad outcomes and b) what works for a construction company may not work for a North Sea fisherman… so it isn’t black and white.
One of the negative outcomes of Brexit is that it has lengthened the supply lines for a number of core supplies from Europe. A significant majority of materials required by UK trade and construction are manufactured or processed in mainland Europe.
As COVID-19 did the rounds almost all major countries suffered shortages in stock. Now however, simply because it makes logistical sense, manufacturers are refilling the supply chains that are closer to home first, with the UK naturally falling to the back of the queue.
This is expected to ease up in time, and whilst it’s positive to see a host of efforts to move material production to the UK, there is no quick fix to this ongoing problem.
Unfortunately, SMEs are feeling the brunt of this, as bigger companies with more purchasing power have been able to buy in these products at higher prices, monopolising the materials industry, to the detriment of their smaller competitors.
Many large firms are also opting to stockpile, to future-proof their business. This has resulted in an in-balance of supply availability, and given that larger companies often rely on much smaller contractors to operate, a more collaborative approach to the sharing of materials would enable to construction industry to weather the storm as a team. Large firms should not use their leverage over smaller ones. This is bad for economy and will ultimately come back around to bite them regarding their reliance on the SME sector for contract staff.
Hold-ups at the border
Another thing impacting our supply chains is the increased regulation and paperwork that can now be seen at the borders. New customs and export documentation resulted in huge delays, even before Brexit was finalised. These delays are forcing many companies to re-engineer their supply chains.
Manufacturers relied on complex and interconnected supply chains, that weaved across Europe and beyond to move materials, components and finished systems between locations and suppliers. Then COVID-19 and Brexit hit these highly tuned avenues for transport hard.
The construction industry depends heavily on fast supply chains offering ‘just in time’ delivery of components, often across multiple borders. Increased regulations surrounding Brexit and COVID-19 are already having a significant impact on how goods are brought into the UK, with delays being reported across the sectors.
In summary, the construction industry supply chains were dealt two huge blows, firstly by Brexit and then by a pandemic.
However, it has shone a light on our resilience. In spite of hardships, there is much to be optimistic about. Consumers have enthusiastically returned to the high street, glasses have been raised to the opening of outdoor dining and drinking as restrictions ease and the vaccination programme continues at pace. Normality feels just around the corner… whatever that is! This can only be good for the economy!
Whilst some of the issues currently blighting our industry will naturally clear with the passing of time as the threat of Covid and Brexit reduces, the short-term impact on the smaller contractor market threatens to derail these good weeks of growth.
The construction industry would do well to work together when it comes to sharing materials fairly, otherwise it will only deal more blows to itself, preventing us to capitalise fully on this latest wave of optimism and growth.