Building materials prices rise 0.9% but industry optimism grows for end-of-year recovery

Building materials prices saw an annual rise in May by 0.9%, according to the latest government figures.

The availability of building materials continues to struggle, with brick and block deliveries seeing significant annual declines of 9.3% and 3.7% as of May. 

Despite these challenges, there are reports of the construction industry being cautiously optimistic about the latter half of the year, buoyed by stabilising costs and anticipated support from government initiatives.

Here we take a look at the latest updates and statistics to see how it might affect how much it costs to build a house.

Building materials prices rise 0.9% in May

Building materials prices rose by 0.9% in May, according to the government's Building Materials and Components Statistics.

Over the year, the index for new housing slightly decreased by 0.1%, while showing a 0.9% increase from April to May 2024. 

The repair and maintenance sector experienced a 0.5% decline over the year, with a notable 1.1% increase from April to May. Overall, the material price index for all work fell by 2.0% annually, yet rose by 0.8% in the past month.

Brick deliveries fall 9.3% annually

The availability of bricks and blocks continued to decline, with brick deliveries dropping by 9.3% and block deliveries falling by 3.7% annually in May. 

Despite these decreases, the material price index for ‘All Work’ fell by 2.0%, providing some financial relief for ongoing construction projects. 

Ready-mixed concrete sales also decreased by 3.4% in Q1 2024 compared to Q4 2023. However, sales of sand and gravel saw a 1.2% increase in Q1 2024 compared to the previous quarter.

Stable product availability despite regional shortages

John Newcomb, CEO of the Builders Merchants Federation, and Peter Caplehorn, CEO of the Construction Products Association, co-chairs of the Construction Leadership Council’s Material Supply Chain Group, report that product availability remains generally good but that there are minor, region-specific shortages in some products.

In a joint statement they said: "There are... isolated reports of minor availability issues for certain profiles of concrete roof tiles, aircrete blocks, doors and some timber products, but these are limited to particular regions or manufacturers and evidence suggests they are likely to be temporary.

"Prices are relatively stable with the level of any increase mostly low and manageable. The main exceptions, as mentioned last month, are PIR insulation which has experienced a more significant price increase, and timber, where prices for some products continue to fluctuate.

"Regarding shipping, the Group continue to monitor the impact of hostilities in the Middle East on supply lines between Asia and the UK via the Red Sea, but any impact on costs and delivery times are said to be modest and manageable."

Despite a slow first half of the year due to bad weather and high interest rates, there is cautious optimism for an uptick in Repair, Maintenance, and Improvement (RMI) work. The industry hopes for government support in promoting housebuilding, infrastructure, energy efficiency, and planning reform to drive recovery, alongside anticipated rate cuts from the Bank of England.

'Sentiment is improving' with regard to construction output

The Bank of England's recent update to the Agents’ Summary of Business Conditions up to June 2024 reveals that the annual decline in construction output is slowing. 

It was claimed that sentiment is improving, with more contacts expecting higher output by the end of the year, supported by stabilising costs and the anticipated easing of bank rates. 

While private housebuilding is still down compared to last year, smaller housebuilders reported improvements in Q2 2024 over Q1 2024, despite an increase in mortgage rates and declining self build mortgage choices.

Larger developers are focusing on social housing projects to maintain output until private demand increases. Although budget constraints have led to fewer public sector projects, utility and core infrastructure developments have partially offset this. 

Refurbishment of older buildings is ongoing to reduce running costs and improve energy ratings. 

However, confidence remains subdued due to sub-contractor failures and lengthy planning processes.

How else could your project be affected?

The Federation of Master Builders (FMB) State of Trade Survey has revealed builders have experienced a decline in demand for their services.

In the fourth quarter of 2023, 63% of members noted a rise in material costs, a slight decrease from the previous quarter's 71%. The resulting financial strain has prompted 66% of members to raise their prices.

However, nearly half of respondents expressed concerns about potential losses or falling below expected profit margins. Additionally, one in five members stated that they are limiting new staff hires due to increased expenditures.

In the private housing sector, there are signs of a cooling housing market as new inquiries decrease and house prices drop and the housing sector faced a sharp decline of 14.9% in 2023, but is projected to recover with a 5.5% increase in 2024 and a 7.0% increase in 2025.

The State of Trade Survey also revealed a slight improvement in recruitment challenges, but a significant portion of members still face difficulties.

Over a quarter of respondents noted a decrease in their number of employees. Specifically, 36% of members are finding it challenging to recruit carpenters, while 34% are encountering similar issues with hiring bricklayers.

Around a quarter of respondents also reported difficulties in hiring general labourers whilst nearly half of FMB members stated that project delays are occurring due to struggles in hiring skilled workers.

This is corroborated by the 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. 

This shortage is particularly affecting SME (small and medium-sized enterprises) builders since it can take a minimum of three years to train up a skilled tradesperson. 

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."