Energy prices to drive second wave of materials cost hikes

Aaron Morby 2 years ago
Share

Cost consultant Arcadis is predicting a second wave of materials price inflation in 2022 driven by high energy costs.

While materials and product price jumps will be less pronounced than this year, tender price inflation is still expected to be between 3-5% in 2022.

This time around energy prices will create the upward pressure rather than raw material shortages.

Due to the high energy intensity involved in their manufacture, products such as bricks, glass, cement and concrete are particularly exposed.

Tender price inflation forecast

This is expected to have a much wider impact on prices than the raw materials boom, which mostly affected metals and timber.

Arcadis costs consultants said it was uncertain how the situation would unfold, not only across different sub-sectors but also regionally.

Certain sectors including private residential or industrial warehousing will continue to boom, but more price sensitive markets, such as rental and affordable housing, could see a slowdown in the market as a result.

Agnieszka Krzyzaniak, Market Intelligence Lead at Arcadis, said: “Strong new orders data indicates that the demand is still there and, as such, prices are not likely to decrease anytime soon.

“Although we can expect the upward pressure on costs to start easing in 2022, elevated inflation rates will still remain a defining feature of the market.

“The difference is that it will be mainly driven by rising energy costs and, with the energy used in manufacturing materials translating into around a quarter of total construction costs, the sector is particularly vulnerable to any prolonged price increases.”

Agnieszka added: “As well as construction materials, another area exposed to energy price fluctuations – albeit to a lesser degree – are on-site operations.

“From next April, they will be impacted by the removal of the red diesel rebate. However, there are a number of short-term measure that clients can take now to reduce their exposure to risk.

“For example, cutting the idle and stand-by time of equipment will save on fuel, and has the added benefit of reducing carbon emission. In the longer term, switching to electric equipment, planning for the adoption of hydrogen and educating plant operatives in managing emissions will not only result in energy cost savings, but pave the way for more positive societal impacts too.”

From 2023 onwards, the rate of growth in many sectors is expected to ease, with inflation falling back to 3% in London and regionally, and 5% for infrastructure.

 

 

Latest news

McAlpine pulls out of £55m Carlisle Citadels project

University of Cumbria starts hunt for replacement contractor
1 day ago

Strabag UK suffers further big trading loss

Austrian contractor is gearing up for major presence in the UK market
14 hours ago

Durham Uni picks UPP for £130m student scheme

Firm will deliver 1,000 self-catered bed spaces
15 hours ago

Architects now upbeat after 10-months of work gloom

Larger practices see rising workloads in next three months
15 hours ago

Motorist dies after collision with road paver

Police Scotland investigating fatal crash
1 day ago

McLaren Living appoints HG Construction for £69m scheme

Build to Rent scheme will transform former vacant car park site in Leeds city centre
1 day ago

Squibb liquidator probes £2m of “missing” plant

Machinery, cars and scrap metal have disappeared at demolition specialist
2 days ago

Galliford Try to re-enter affordable homes market

Contractor sets out new five-year plan to build margin to 4%
2 days ago

Former Sellar chief to lead civils contractor Kilnbridge

Owen Dannatt joins as new CEO as founder Dermot McDermott becomes Chairman
2 days ago

Hunt starts for nuclear fusion plant construction partner

Fusion energy plant to be built at West Burton coal power station site.
2 days ago

National Grid raises £7bn for big infrastructure upgrade

Rights issue to fund a major round of capital investment in energy infrastructure
2 days ago

Grenfell police probe to last at least until end of 2025

19 companies and 58 individuals could eventually face charges
2 days ago

Mace confirmed on £100m London office retrofit

Work underway on Helical's 100 New Bridge Street job near Ludgate Circus
2 days ago

Wylfa chosen for next big nuclear power station build

Government names Anglesey site for a large-scale gigawatt nuclear power plant.
3 days ago

Bowmer & Kirkland trading profit halves

Contractor buys HVAC specialist Adcock despite challenging market
3 days ago

Piling specialist Van Elle plans further job cuts

Piling specialist plans further cost savings in face of lower demand
3 days ago

Civils contractor A Catlow files administration notice

High voltage cable specialist lodges court notice
3 days ago

Green light for ARC Oxford lab campus

Work to start later this year on £40m Ascent building job
3 days ago

Stonehenge tunnel hit by another legal delay

Court upholds latest appeal against £1.7bn scheme by campaigners
3 days ago

Plans go in for huge Olympic Park construction hub

Bow Goods Yard could deliver 3.5m tonnes of materials a year to sites across London
4 days ago

40% affordable homes target for Labour’s new towns

Labour pledges to select new town sites by end of first year
3 days ago

Plan for £100m Liverpool Baltic station

Construction work could begin next year
4 days ago

Surgo Construction went down owing £4.5m

Biggest creditor is Bellway Homes after dispute on housing job
4 days ago

Vistry seals £157m West London housing deal

Around 575 homes to be built at Merrick Place scheme in Ealing
4 days ago

Streamlined Watkin Jones returns to profit in first half

Multi-room specialist sees secured work pipeline hit £1.4bn
4 days ago

Bellway hires ex-brickie as group construction chief

James Griffin to oversee move to the Future Homes Standard and timber frame.
4 days ago

Persimmon under fire for delays to £10m relief road

West Suffolk Council serves Breach of Condition Notices after timetable slips again
4 days ago

BAM wins £33m Kent secondary school job

Replacement Swanley academy to be built at live school site
4 days ago

Aluminium cladding specialist collapses

Melton Mowbray-based firm worked for several main contractors
5 days ago

Brickwork contractor Lee Marley returns to profit

Affordable and rental homes demand lifts brickwork contractor
5 days ago

Contractor services