Energy price rises have been a key topic of discussion in the UK since the Ofgem price gap first started to rise in 2022.
While prices dropped towards the end of last year, and many energy firms bought back fixed rate tariffs at more competitive rates, the price cap rose again in January 2024.
These regular price rises for energy, which have seen costs double or more for many homeowners and business leaders, are having an effect on almost every part of the corporate landscape.
For the construction industry, this is particularly true, especially since the market has high energy needs. As a result, there are many changes that we’re likely to see in 2024, as we outline in this article.
As homeowners and commercial building managers seek new ways to power their properties, it’s likely that we’ll see a rise in demand for renewable energy sources and technologies, such as solar panels. Also, as the UK government has scrapped VAT on Tesla Powerwall battery storage from the 1st of February, suppliers like AR Power predict there will be an increase in demand for these tools. As such, these features may become more likely in new build homes and will be a top choice for homeowners looking to renovate their properties going forward.
As well as affecting buyer behaviour, rising energy prices will continue to put a strain on project budgets over the coming months. Surging electricity prices are impacting the day-to-day operations of construction projects. Powering vital construction equipment and job site trailers, as well as charging batteries for cordless tools, will become more expensive as the cost of energy increases. This may cause project budgets to become stretched and might result in delays in completion.
As well as direct power prices, higher costs for fuel and raw materials like steel, concrete, and lumber are driving up overall construction costs. This is making some projects less financially viable or forcing developers and contractors to find cost savings in other areas. This might include sourcing from local companies or finding cheaper alternatives to heavier or more expensive materials. While this may save costs in the short term, it could lower the quality of some projects and cause longer-term issues.
Almost every market has seen significant uncertainty due to economic constraints caused by rising energy prices, and construction is no different. It’s likely that in 2024, there will be even more uncertainty as construction companies seek to weather the storm and achieve building targets while also ensuring profitability for long-term success. While industry insiders predict a recovery for the construction market in 2024, the lack of clarity on energy costs and the rising price of powering sites could hamper projects, particularly at the start of the year.
It’s only the beginning of the year, so there’s still plenty of time for things to change. However, these are our predictions for how the regularly increasing energy prices will affect the construction market in 2024.