Chronic construction shortages could affect housing and infrastructure delivery in 2022

Whilst double-digit growth recently forecast for the construction industry in 2022, property consultancy Vail Williams urges caution as industry faces chronic shortages.

A recent report from the Construction Products Association has forecast construction output to rise by 6.3% in 2022. Yet, behind this façade of buoyancy is a sector struggling to maintain construction pace, amid crippling shortages and rising costs, according to Vail Williams.

Indeed, it was the Royal Institute of Chartered Surveyors (RICS) themselves, who recently issued a stark warning in their recent report highlighting the issue of rising global material costs, which 83% of respondents stated, was already holding back construction activity.

We believe that the harsh realities of Brexit have come into play, exacerbated by global supply chain bottlenecks and the effects of the pandemic, resulting in a UK skills shortage, rising materials and labour costs which could slow down delivery of construction projects in 2022.

“What is happening in the construction industry currently is a warning to Government and industry that things need to change if housing targets are to be met, and key infrastructure projects delivered,” commented Holly Vos, Chartered Surveyor based in our Woking office in Surrey.

Whilst nearly 50,000 homes were built in the first quarter of 2021, over 100 local authorities failed to deliver on their targets in 2020. With 300,000 houses a year to deliver, many developers are struggling to meet Government targets for housing delivery in 2021, thanks in part to Brexit, as well as the challenges of a planning backlog.

In its Building on Brexit Report, the Construction Industry Council warned of the potential impact of Brexit on the industry, and it appears we are now seeing this come to fruition, brought even further into focus by the pandemic.

According to RICS, a shortage of brick layers and carpenters has been holding many firms back as they struggle to keep up with demand for new housing and infrastructure.

Approximately 1.3 million foreign-born workers have left the UK in the past year and demand for construction workers is now at a 20-year high.

Given that 7% of the construction industry’s workforce is made up of people from EU nations, and that more than 75,000 non-UK nationals left positions within the industry between 2019 and 2020, it is no wonder that the construction industry is feeling the effects. This has been compounded by a chronic shortage of surveyors in the UK.

For those operating in the sector, many find themselves under increasing pressure with growing workloads, particularly in the housing and energy sectors, according to RICS.

To ensure that more surveyors come into the industry, we must evolve the way we train and develop future professionals to equip them to deal with change across the sector, as Holly explains:

“There needs to be more education on the roles available in the industry at a grassroots level and it was disappointing not to see more on this in the Budget. Having come into the industry via a conversion cause myself, I think there needs to be more awareness of this amongst graduates who have an interest in the industry but with a non-cognate degree.”

Together with the supply issues highlighted by the Builders Merchants Federation which are creating problems with supply of materials like steel, wire tiling, roof products, concrete, cladding and structural timber from Europe, the UK construction picture worsens still.

“Whilst 95% of the concrete blocks used in UK construction are domestically sourced, for one client we work with, who would normally have to wait mere weeks for concrete floor planks from Europe, has been quoted several months, badly affecting project timescales and costs.

Factories shutting down for extended periods during the pandemic, the stock piling products to ensure availability of materials and fixed costs, and of course the issues we have seen with fewer lorry drivers, have all driven up construction delivery costs, slowing construction growth and the delivery of housing and key infrastructure projects.

Holly continued: “It could take several years to return to full capacity and there may be a focus on ‘just in time’ models, although comes with its own issues. We have also been seeing an increase in activity from clients over the last 6 months which in turn is impacting supply, demand and costs.”

According to the Department for Business, Energy and Industrial Strategy (BEIS), material costs in August this year were some 23% higher than in 2020 because of supply issues, with prices for imported plywood nearly 82% higher in 2021 than they were in 2020.

Tender prices are also on the up, driven by materials cost increases and longer supply times. Coupled with skyrocketing container costs and congestion at UK ports, the construction landscape looks increasingly bleak.

“Construction programmes going out of the window as developer costs increase, resulting in significant project delays. And whilst the banks are still comfortable lending money to developers to deliver their schemes, there is a question over how long will this last, in the current climate,” Holly added.

Developer profit margins are closing and, ultimately, the cost of this will be passed onto the consumer, who can expect to experience rising house prices, and businesses shouldn’t be surprised to see an increase in the cost of commercial property and commercial rents.

Vail Williams believes that developers will need to flexible with their choice of materials and plan schemes early having taken professional advice to minimise delays.

“Undertaking the necessary project and materials pre-planning to build in extra contingencies and anticipate materials supply issues is vital. We understand the challenges that developers face as well as the delivery pinch points in the supply chain and labour force and can use this knowledge to ensure delivery of construction projects on time and on budget.”