The latest market report from international property and construction consultancy Gleeds has revealed the extent of the impact that the conflict in Ukraine is having on the UK construction industry. 87% of contractors questioned said they have experienced price hikes as a result of the ongoing situation in Eastern Europe, while over two thirds believed current challenges are negatively affecting growth in the sector as schemes stall due to lingering uncertainty.
62% of contractor respondents also reported having experienced reduced availability of specified materials since Russia’s invasion, with 60% experiencing disruption in the supply chain and reduced validity periods. Almost 90% of those quizzed said that steel was the material most heavily impacted – findings which echo the BEIS’s ‘All Work’ Construction Material Price Index which also saw significant cost escalation as a direct consequence of the conflict.
These issues have been compounded by continuing labour shortages, with 70% of contractors reporting problems with supply in the first quarter of 2022, compared with just 17.5% at the beginning of last year. A massive 84% noted increases to labour rates over the same period, up from 44% in the first quarter of 2021. As a result, nearly half of contractors surveyed ranked materials and labour cost escalation as the biggest threat to the industry, ahead of the war in Ukraine.
James Garner, head of data, insights and analytics at Gleeds said, “While 2022 started on a fairly steady footing, Russia’s invasion of Ukraine changed the picture suddenly and issues with commodities price escalation and international trade disruption have meant a revision to, and increase in, our previous inflation forecasts. Prices of steel products have been surging along with many others, and these inflationary rises are adding further pressure to already stretched project budgets. There is clearly a concern that this uncertainty could lead to schemes being delayed until confidence returns to the market, however we have all experienced many challenges over the past couple of years and against a difficult backdrop, there is genuine hope that the industry can emerge stronger.”