Construction Industry Costs Rise as Pound Falls

In its latest construction market analysis, Glenigan reports on how the sharp fall in Sterling over the last year has significant implications for contractors and construction clients. It states that contractors will need to ensure that the impact is effectively costed into future tenders, while clients’ expectations will need to adjust to the shifting economic landscape.

The most explicit impact is in the price of imported materials and components. The UK imported £11.7 billion of construction materials and components in 2015. This suggests that the 18% decline in the value of Sterling against the US dollar and the 15% drop against the Euro since the start of last year could potentially add £2.5 billion per annum to contractors’ costs.

The weaker pound is also adding to UK manufacturers’ costs as the price they pay for energy and imported raw materials rises. This is again likely to feed through to contractors as higher prices for UK manufactured products.

Furthermore contractors are also facing increased cost pressures in other areas, such as higher fuel costs, as a result of Sterling’s decline. The availability of skilled labour may also be adversely affected as migrant workers see the purchasing power of their UK earnings in their home country decline.

Source: Glenigan

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