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How the energy crisis is hampering the construction industry

The energy price cap – an initiative that set a limit on the maximum price an energy supplier can charge its customers for energy used – is providing a lifeline for consumers facing rapidly rising energy prices until April 2023. Businesses however have access to less generous support, meaning organisations everywhere have had to increase their costs to survive during these troubling times.

The construction industry has felt the impact of the energy crisis just like many other sectors in recent months, and with costs expected to rise further during 2023, organisations are continually firefighting to stay in business. Here we take a closer look at how the energy crisis is hampering the construction industry.

The cost of supplies has spiked…

Only by looking at the industry as a whole can you understand the true plight of the UK construction sector. Rising energy prices after all are not unique to construction businesses, with the manufacturers that supply the raw materials construction companies need to complete projects also impacted.

With manufacturers having to pass the cost of energy on, building supplies have experienced a dramatic increase in price. Aggregates, bricks, timber, cement and concrete are just some of the building materials that have soared in price due to the highest inflation rate in 40 years.

According to the Department for Business, Energy and Industrial Strategy’s building materials and components statistics, the material price index for ‘All Work’ increased by 15.5% resulting in the import of construction materials decreasing by £514 million during Quarter 3 of 2022.

…meaning projects are pricier

The cost of materials has had a knock-on effect on the price consumers pay for their construction projects. Builds that use energy-intensive products in particular have seen costs increase dramatically, with construction firms under pressure to pass on the price of energy, supply chain disruptions and raw materials to their customers.

The result has hampered construction projects no-end, with home and business owners unable to go ahead at the higher price point and construction firms failing to secure work.

Less business, fewer workers

The hampered growth of the construction industry has also affected the intake and training of workers. As an industry already well-known for its labour and skills shortages, the future of the sector as a whole is in jeopardy. With fewer projects, there is less investment in the talent that’s integral to the construction industry’s survival and progression.

The issue regarding labour and skills shortages has been further intensified by workers returning to the EU following Brexit. Sub-contractor charges have skyrocketed in line with these industry-wide issues, with construction companies experiencing a further squeeze on margins.

Problems for confirmed contracts

Supply chain disruptions and labour shortages aren’t just affecting construction firms securing work. For companies with planned projects in the pipeline, the contractual disputes that arise due to delays is causing further issues. The cost of construction insurance has risen as a result, with contractors unable to deliver projects in the previously proposed timescales the main subjects of insurance claims.

For more information and support relating to energy efficiency measures and business energy procurement, it is advisable for businesses to seek help from an expert.