It was reported in February that construction output has risen by the most rapid rate possible in the space of just eight months. Despite this, optimism is beginning to fade as the industry looks to the future, identifying supply shortages and the impact of rising costs causing output to potentially fade. Read on to find out more about this.
Things to consider
It has been reiterated by experts, however, that this rapid growth in construction output is proof that the construction industry is back to its pre-pandemic levels of output. What we do not yet know is how the ongoing crisis in Ukraine, and the inevitable consequences this will have on global energy prices, will influence pressure on inflation. This is yet another worry for construction project delivery at a time that is so important to the construction industry, when the sector begins gearing up for the busy summer months.
Because the price of energy is increasing (oil prices and liquified natural gas are now massively high), and margins within the industry already proving rake-thin, there is a real possibility that pressures on inflation will drive some businesses to close down. Since unexpected trauma to the sector from past events such as Brexit, people are capable of adapting to a new environment, but only to a certain degree. Businesses are also putting more attention on their supply chains and understanding the real need for diversification.
This could indicate that the sector is far better able to hold out against the inevitable disruption of flow from the crisis in Ukraine than it would have if Brexit had not occurred.
Things to improve
We saw a rise in housing output from 54.3% at the start of the year to 61.5% in the month of February, with construction businesses continuing to report he highest numbers they have observed for output since last June! While there still seems to be considerable volatility in the market as it relates to price and supply conditions, the overall rate of growth with new orders showed a major acceleration from the start of the year onwards.
Client confidence also clearly improved along with increased economic activity, as we saw plan B restrictions (mandatory face masks, work from home) lifted across England. However, large reports of shortages in materials and labour continue to poorly impact the construction industry, with rises in input costs placing additional strain on UK businesses.
Things to monitor
There may be a sense from contractors that they have been able to completely withstand the considerable economic turmoil of the past two years in an effective manner, but obstacles will present themselves as we look to the future. There have already been contingency plans being made for the taxes on residential cladding that will be enforced in April.
Because of this, it is important that contractors keep closely monitoring the vitality and health of their own supply chain and continue to make efforts that will help them navigate the impact of costs rising; continued dialogue and early forms of engagement are a fantastic way to achieve this. Because construction output is rapidly increasing its best to consider that this growth will likely slow and decline at some point in the future, so be prepared for any adjustments that you will have to make.
Cotswold Contractors Ltd are a family run construction firm with a reputation for top quality work in the industry and local community. Whatever your commercial or domestic construction needs in Gloucestershire, give us a call today 01453 453990 or take a look at our website www.cotswold-contractorsltd.co.uk