News > Tender inflation and supplies shortages

Tender inflation and supplies shortages

Contributors:

Roger Watts

It is difficult to escape the news stories of the supply shortages across the country, with the military being called to ease the demand for lorry drivers being the latest chapter in this particular situation. But it doesn’t stop there.

In all honesty, we are entering a challenging period where we see uncertainty in labour and material supplies and, as a result, uncertainty in cost stability.

Much like other consultancies, we have had recent projects held back by situations such as the absence of roof sheets and roller shutter doors.

There is no doubt that there is increased demand for refurbishment and repurposing of buildings. The need to upgrade warehouse premises upon vacancy, and the need to remodel offices to account for the new normal is particularly strong. We are seeing this middle tier suffer from the current uncertainties due to a significant lengthening of lead times and cost inflation.

Major new works are faring better where the delays in material deliveries can be factored into more substantial build programmes. Similarly, we see small scale jobs by local workforces continuing in a reasonable way – although skill shortages and material supply issues are leading to longer waits and higher prices here too.

In the UK there is a feeling we are now out of the woods in relation to COVID. Demand in the sector has increased 3.6 percent in the last three months (ONS). However, the global impact of COVID, namely the border issues, means supply chains are under significant pressure. This is especially relevant to steel and timber products but also some products with a hi-tech element.

There is no doubt Brexit red tape including the absence of lorry drivers is having an influence too. Skilled labourers returning to Europe as COVID struck has been a considerable issue. For example, getting a large team of decorators together is currently very difficult.

Many commentators have different views as to how prices are likely to increase over the year. There is a huge range given the large number of variables. Our view is that for a mid-range project, a 5 percent increase in cost can be expected pretty much across the board. This is of course dependent on the project. Where, for example, there is a warehouse project requiring steel products and lots of painting then those extra resources are likely to increase the cost, possibly in the region of 10%.

As we know cement and plasterboard products are in short supply but generally such issues can be managed. However, Jewsons, the materials suppliers, is even suggesting materials like wheelbarrows, insulation and adhesives will rise by 20%.

Most mid-sized builders are used to turning up at a merchant’s to easily collect what they need on an ad hoc basis. Those days have gone in certain cases. Builders now must plan when ordering and, in some cases, phase their collections. Reportedly in certain areas like East Anglia, bricks are on a 26-week delivery lead-in, and roofing tiles on a 16-week lead-in.

In areas like the Midlands there is a suggestion that major projects like HS2 and the facilities for the Commonwealth Games are sucking in and hoarding materials, particularly cement.

Obviously, each project needs to be viewed on its own merits. However, the prospect of having works being done as an emergency project is becoming much harder.

If you would like to discuss how we can provide your project in budget and on time, speak with roger on 07775 944662 or at roger.watts@tridentbc.com.

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