It’s hardly news to anyone in the construction industry, and even the wider public is now becoming aware of it.
We’re talking, of course, about the severe shortage of building materials that’s hitting the world, a problem that the UK is feeling even more acutely.
The issue is now bleeding through to homeowners who can’t get extensions, and even people renovating their bathrooms are finding they’re on a waiting list for a new basin.
This is a massive and complex problem, so we thought we’d have a look at the causes to see if there could be any clues as to when the problem will start easing.
The perfect storm
There do seem to be at least five issues at play here. There’s clearly The Big One – the Covid pandemic – but there are also other problems that are contributing to the bigger worries.
Any of the following in isolation, with the possible exception of the pandemic, might have been relatively easy to overcome, but coming in one combined force, they have fed off each other and multiplied. Let’s go through them one by one.
A huge surge in demand
We’re currently living through an enormous amount of construction activity – a 24-year growth rate, according to the IHS Markit / CIPS UK Construction PMI Total Activity Index. That’s partly simply down to the season; summer is always busier for obvious reasons. But we’re also playing catch-up after the initial lockdowns of Covid-19, even though generally speaking, construction was among the first industries to get back to work.
Added to that, however, a general uptick in construction projects was just getting underway in the middle of 2019, and continued for six months before the pandemic hit. Projects have, largely, continued the trajectory, albeit with a significant Covid blip in early 2020.
Shortage of materials and components
Three vital building materials are suffering supply-side shortages right now, and have been for several months. Timber and roof tile shortages are adversely affecting house building and smaller commercial projects, while a shortage of cement is affecting the whole construction industry. Large companies, with more robust supply chains, seem to be weathering the storm better than the smaller builders, who have less purchasing power and often source materials on a short term basis, often from builders merchants.
There’s also a global undersupply of electronic components. Again, we have Covid mainly to blame for this, particularly because most of the world’s electronics come from China and other nations in the Far East, which is where the pandemic first emerged. Factories were closed overnight, and the whole supply chain was disrupted.
Most of the supply issues facing the industry are in large part down to Covid, as we’ve seen above. But the disease has simply slowed everything down, from mining and forestry to childcare, education and transport, all of which affect workforces and have knock-on effects throughout the global economy.
That’s not forgetting, of course, that millions of hours have been lost because workers and their relatives have been sick, often seriously so.
Haulage shortage in the UK
It’s now mainstream news that there’s a crippling shortage of HGV drivers in the UK, and it’s difficult to see how the problem can be solved in the short term without a major shift in government policy surrounding training, work practices or easing the path for foreign (i.e. EU) driver. Before the pandemic, there were about 600,000 HGV drivers in the UK and we were still short by 60,000. Now we’re short by a staggering 100,000.
The economy is now accustomed to “just in time” logistics, and construction is no exception. It’s a system that is not very good at coping with unexpected shocks, especially of the magnitude of the pandemic. It’s easy to see how small delays and missed connections can magnify down the line, and that’s exactly what has happened.
The UK is also uniquely placed because we’re an island nation and Brexit came into force almost at the exact moment Covid hit. While shortage of haulage drivers was widely predicted before Brexit, the pandemic has meant that opportunities to fill the gaps have been slowed.
Nevertheless, continental drivers who would once have found it easy to find work in the UK are now steering clear of crossing the Channel and the North Sea thanks mainly to paperwork and time spent queuing – most are paid by the kilometre.
While it is fading from the public’s memory, the world’s supply of goods is still being affected by the unfortunate blockage of the Suez Canal after Ever Given, a 220,000-ton container ship, ran aground there in March 2021. After the huge floating traffic jam on both sides, shipping companies had a choice: gamble on the blockage being freed quickly and wait; or re-route around South Africa, adding perhaps nine or ten days, and a lot more fuel, to the journey.
As it turned out, the container ship was freed after about a week, but the effects of that week and the disruption and backups that were caused are still being felt today – ports can only cope with so many containers per day, after all. And what are the containers loaded onto? You guessed it: HGVs (sometimes via freight trains).
An end in the pipeline?
Unfortunately, our crystal ball delivery was on Ever Given, so we’re looking to the experts to assess when the situation will normalise. There seems to be something approaching a consensus that by the end of 2021, supply should be much closer to meeting demand, and that should have an effect on the ability for the industry to carry on at full speed, and for materials’ costs to return to normal. The factors at play are explained here:
- Demand will remain high, especially since many projects have been slowed down or stopped due to the lack of materials and Covid.
- The roll-out of vaccinations should start to increase productivity by reducing the days lost through sickness and speeding up the opening of industry around the world.
- Covid-19 looks like it will still be with us at the end of the year, with some scientists saying it might never fully disappear, but by the end of the year, we should be in a much better place with infections, and better able to deal with outbreaks. However, new variants and the effects of long Covid remain unknown.
- Thankfully, the Suez Canal is operating as normal, and the backlog will peter out.
- The haulage issue in the UK is perhaps the most insurmountable obstacle in the short/medium term.
Even if productivity returns to normal, distribution to the UK will still be stymied by a lack of lorry drivers. Increasing the time that drivers can work from 9 to 11 hours a day might help a little, but that’s pushing the limits of safety and won’t be extended any further.
Food, medicines, clothing and fuel are always going to take priority on the roads, so it is up to the government to treat this issue with the urgency it deserves. There is a lot more than the construction industry at stake.
- Continued uncertainty around Brexit will not only have a direct impact on haulage and broader logistics, but will continue to provide difficulties related to overall shortages in construction workers across the board.
- With companies already feeling the pinch from lockdowns and a longer-than-expected economic recovery, price increases on materials will further put pressure on those smaller firms in particular who will have already been hit the hardest.