Why are building material prices going up so much and how do I keep on track?

Why building material prices are going up at such a rate is not too much of a mystery in these difficult times. But you have to wonder how long it can keep going.

You will have heard about and likely experienced the unprecedented demand for materials. Shortages and cost inflation are causing problems across the supply chain. The worldwide pandemic has impacted manufacture and transportation. Brexit has played its part as well.

As John Newcomb, CEO of the Builders Merchants Federation said at the start of 2021 (despite the EU Trade Deal): “We remain concerned over the capacity problems at UK container ports, which in recent weeks have demonstrated how quickly shortages and consequential price increases can occur.”

The end customer is being hit in the wallet as their extension or new build becomes pricier and pricier. You’ll be well aware that slower progress due to Covid security measures, PPE and associated products, plus material prices rises are impacting the final bill.

Material shortages top concern

According to Builders Merchant News in February 2021, of their three top concerns, ‘almost half of roofing and cladding contractors put material shortages at the top of the list. That’s according to a new State of the Roofing Industry Survey produced by Glenigan for the National Federation of Roofing Contractors.

“Roof tiles were the most common material shortage reported by roofing contractors in the final quarter of 2020, with almost half of firms struggling to get hold of them (49%). Roofers also listed timber and battens (17%), slates (14%) and insulation (five per cent) as other materials in shortage.”

In the Builders Merchant Journal in February 2021, a monthly report from the Timber Trade Federation found that the growth in the imports of the main timber and panel products in November 2020 of nearly 37% is in stark contrast to the 39% reduction in volume in April 2020.

David Hopkins, CEO of the Timber Trade Federation, has said: “Record volumes of timber are being brought in and absorbed by the market as quickly as they are coming off the dock, often by previous allocation.”

What next? This next! In a letter to the Chancellor of the Exchequer at the end of January 2021, the Construction Leadership Council asked that the plan for Reverse Charge VAT be withdrawn. They cited the risk of cash flow restriction at an extremely critical financial period for many businesses.

So what can building firms do to mitigate the impact of price rises?

  • Accurate pricing when you estimate is the starting point. We’ve just updated the Price Tracker in our BuildingWorks platform to reflect the significant changes in materials pricing. Monitoring and updating the prices is an ongoing operation.
  • Organisation is key in such difficult times. BuildingWorks gives you essential reports: cost reports, material schedules, profit and cashflow forecasts and more. With spreadsheet style grid and pivot table reports for data mining you can quickly get to optimising your profits.
  • Make it easier to be flexible. The Professional version’s onboard Gantt chart calculates how long the project should take. It includes an editable build programme, just in time material schedules, cashflow and stage payment profiles.

If you’re not across all the information, there’s a chance you won’t pass on the extra costs to your customer. And someone has to pay for the prices rises. So if you want to avoid being out of pocket we can help.

Have a 30-day fully featured trial of BuildingWorks Design and Estimate modules. There’s no obligation. You can see for yourself what a difference the BuildingWorks software platform could make to your business. Go online to set it up or call 0117 916 7880.

Joanna Mulgrew is the Operations Director for the HBXL Group, of which Integro Construction Software is a company.