Article from Northcroft Europe office
The global construction industry is facing new challenges as a result of the COVID-19 pandemic while the UK has the added impact of Brexit. We recently produced a Construction Market Report which delves into the impacts and mitigation measures needed to support the industry over the coming years.
Within our report, there are 3 major areas of concern which have global impact. They are:
1. Material shortages
Demand for materials has significantly increased at a time when production has decreased.
The pandemic has disrupted the supply chain and created logistical issues which have lowered total output compared with pre-pandemic times. In addition, there are fewer suppliers in the market due to financial issues and liquidations triggered by the pandemic.
Of particular concern in the UK are:
- The need to rebuild material stockpiles to pre-Brexit levels
- Workforce constraints due to the emigration of skilled labour
- Increased material costs caused by Brexit’s non-tariff barriers
All of these factors have led to material shortages, increased lead times and higher material prices.
2. Labour shortages
As the industry reboots, we’ve seen a shortage of skilled labour in key trades such as bricklaying, carpentry, steel fixers etc. This has created inflationary labour costs due to fierce competition to get labour on site.
3. Cost changes between tender and completion
The material and labour shortages means there are likely to be cost increases between tender and completion. In addition, the cost of preliminaries have increased to align with COVID-19 protocols. As a result, it’s more challenging than ever to ensure sufficient margin is maintained to cover cost escalation when tendering.
Mitigation strategies
Whilst supply and demand issues are leading to higher costs and programming issues, there are mitigation measures which can be applied to minimise the impact on projects. These include:
- Reducing delays during construction by allowing time within the project programme for longer mobilisation periods to account for increased lead times.
- Ordering building materials with particularly long lead times earlier than you would during pre-COVID times.
- Achieving greater collaboration with contractors in order to manage risk and ensure sufficient financial allowances and lead in times are made.
- Ensuring timescales for tendering are realistic. For example, it may take longer than anticipated to collate quotes and provide a fully costed bid so allow more time during the bidding stage.
- Obtaining expert assistance to keep projects on-time and on-budget.
For over 180 years, Northcroft has been providing cost management, value engineering and quantity surveying expertise, with projects delivered in over 80 countries. To discuss how we may be able to assist you, get in touch.
Photo courtesy of Luca Campioni