Skip to content
City PM
  • Germany
  • France
  • Europe
  • Markets
  • Business
  • Opinion
  • Germany
  • France
  • Europe
  • Markets
  • Business
  • Opinion
Thursday 25 November 2021 10:00 am  |  Updated:  Wednesday 01 December 2021 11:51 am

Soaring inflation in construction could spell disaster for housing in England

By: Elena Siniscalco

Add as a preferred source on Google
Building Kosovo's Biggest Wind Farm

The construction industry has been hit badly by inflation. Material prices are up: in terms of year on year increase, structural steel is at 65 per cent, reinforcement steel is at 62 per cent and plywood is at 56 per cent.

Familiar supply chain problems are causing delays, and the cost of both energy and labour are also up. All these elements have conjured a perfect storm, even if the consequences are not felt uniformly across the industry.

Rising costs have created a new hierarchy within the construction industry. At the top we find companies using modern methods, such as building entire houses in factories and then transporting the finished goods right where the expectant couple or the excited family await for their new property. For this, the cost of transport is cut considerably because everything is coming from the same place. Supplies don’t need to make their way from the corners of the country – or the world – to a construction site in East London. This is at the bottom of the new order: traditional building companies transporting materials and subcontractors around various sites.

Smaller contractors working on fixed contracts risk losing their business because “they don’t have the funds to cover additional expenses that are rising during their work,” according to Caspar Harvard Walls, a partner at buying agent Black Brick. As a result, smaller firms are avoiding fixed contracts and delaying taking on new projects.

Rico Wojtulewicz, head of Housing and Planning Policy at the National Federation of Builders, has warned small companies operating outside of cities will suffer the most as a result of rising material prices as well as a lack of accessibility to products. With winter coming, building becomes even trickier because certain structural elements must be put into the ground before temperatures get too low. Thanks to the delays, some projects might have to stop until spring, putting additional costs onto small constructors.

All of this really matters. Small and medium businesses account for more than 99 per cent of British business, and 16 per cent of them operate in construction. This is a huge stack of enterprises that might lose money and have to start firing staff. But many of those who will struggle the most will be in the North East, the Midlands and the North West, according to Wojtulewicz.

The political consequences then reach right to the heart of many of the problems Britain faces. Outside of London, the North West is one of the most populated areas of England, with that number set to grow, especially with the current push from Westminster to tempt young, ambitious Brits to places outside of London.

Read more

Construction output tumbles as builders hit by surging costs and red tape

A decrease in repair and maintenance drove the decline in construction

According to the Office for National Statistics, the number of households in the North West will grow by 176,000 by 2028. The population of the East and West Midlands is set to grow by 7.7 per cent and 8.7 per cent respectively – on par with London’s expected growth of 7.8 per cent.

By 2031, we need to be building almost 340,000 homes a year across the country, according to the National Housing Federation. In 2019/20, there were 220,600 new homes completed, slightly up from the 214,410 the year before. But not enough. Further delays could puncture any plans to put the housing crisis on hold. With Michael Gove, in his position as Housing Secretary, currently reviewing the planning reforms in a bid to fix the broken market, the prospect of inflationary pressures on new homes is existential.

A chain of liquidations in the North and the Midlands would also mean rising unemployment. In political terms, that’s a disaster for the levelling up agenda. Much of the fears about inflation have focused on the consumer implications, with a cost of living crisis and fewer people buying fewer goods, leading to a stunted economic growth.

For affordable homes in particular, inflation in construction poses a problem.

Peter Hardy, co-head of Housing at law firm Addelshaw Goddard warns constractors could get away with devoting a smaller rate of their projects to affordable housing by blaming higher costs. Politicians, desperate to get anything built, could acquiesce to more relaxed planning applications more easily.

Andrew Shepherd, managing director at TopHat, a construction company acquired by Goldman Sachs in 2019, is one of the lucky ones. TopHat is a SME, but one that’s growing fast and employing modern methods. “We aren’t building less, if anything there has been a huge uptake in demand. We’re fortunate because we can order materials one year in advance, but companies that use more traditional methods and work on different sites make orders two weeks in advance,” he says. Currently, delivery periods can stretch up to sixteen weeks. The impact of a delay like that is enough to bring a small company to its knees. That means collateral costs, such as scaffolding staying up longer, are higher as well. The risk of taking on a new building project is looking dangerously close to too high for many contractors. 

Read more

Industry chief calls on government to water down steel tariff plans

The trade deal is set to eliminate the tariffs on steel and aluminium if the UK meets its pledge to cut China out from supply chains.

Share this article

  • Facebook
  • X
  • LinkedIn
  • WhatsApp
  • Email

Similarly tagged content:

Sections

  • Opinion

Categories

  • Opinion

Trending Articles

  • Top Burnham adviser calls for capital gains and inheritance tax hikes

  • Housebuilding giants hit with £4.5bn lawsuit for allegedly overcharging buyers

  • A meeting with the breakfast king of Mayfair

  • Brewdog chief executive quits after only one year

  • As it happened: Stocks jump on defence and metals boost; Oil on track to shed a fifth on US-Iran peace hopes

More from City PM

  • Construction output tumbles as builders hit by surging costs and red tape

    Economics
    A decrease in repair and maintenance drove the decline in construction
  • Industry chief calls on government to water down steel tariff plans

    Industrials
    The trade deal is set to eliminate the tariffs on steel and aluminium if the UK meets its pledge to cut China out from supply chains.
  • Housebuilder Bellway warns mortgage rate hikes dampening housing demand

    Property
    Things could be looking up for Bellway
  • UK manufacturers facing ‘steel quota cliff edge’

    Industrials
    The steel industry has been particularly badly hit by rising energy costs
  • Councils turn to AI to boost housebuilding

    Property
    The Planning and Infrastructure Bill was introduced to Parliament earlier this week.
  • Vistry shares plummet as housebuilder pauses buyback and warns on inflation

    Property
    News article context image with abstract design elements related to business or general news themes
  • ‘Obscene’ – HS2 on track to cost at least £102bn as minister slams ‘gold-plated folly’

    Transport & Infrastructure
    HS2 construction progress at Birmingham station with cranes and workers, highlighting UKs high-speed rail project development
  • Steel tariffs watered down after industry backlash

    Industrials
    Britains steel industry facing challenges with potential shutdowns and job losses, highlighting economic impact.

City PM — European politics, business and analysis.

Europe

  • Germany
  • France
  • Europe
  • UK & Ireland

Topics

  • Business
  • Markets
  • AI
  • Technology
  • Opinion
  • Energy

More

  • Politics
  • Economics
  • Fintech
  • Legal
  • Sport
  • Life

Company

  • About City PM
  • Editorial Policy
  • Corrections
  • Contact
  • Terms of Use
  • Privacy Policy
  • Cookie Policy
© 2026 City PM · Published by CityPM Media, Bahnhofstrasse 65, 8001 Zürich, Switzerland
About · Editorial Policy · Corrections · Contact · Privacy