Soaring costs in building materials a threat to economic growth, report warns

Builders believe labour costs will rise 4.4% and material prices 6.8% in next 12 months

Local shortages of timber, allied with manufacturing disruptions, have sent some costs soaring by up to 60 per cent. Photograph: Alan Betson

Local shortages of timber, allied with manufacturing disruptions, have sent some costs soaring by up to 60 per cent. Photograph: Alan Betson

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Increases of nearly 35 per cent in the price of some building materials pose a threat to Irish growth, a new survey warned on Monday.

Covid-19 remains a lingering problem for Irish construction, but rising costs are among several factors hampering the industry’s growth, according to project managers Turner & Townsend.

The firm’s latest market intelligence survey states that prices for reinforcing bars, structural steel, aluminium curtain walling/panelling and copper all showed sharp increases in the first half of this year.

Price hikes range “from 34.2 per cent for reinforcing bars to 7.5 per cent for copper”, according to the report.

Turner & Townsend’s assessment follows ongoing complaints from builders and their suppliers that prices for key materials are rising across the board.

Local shortages of timber, allied with manufacturing disruptions caused by Covid-19 and extreme weather, have sent some costs soaring by up to 60 per cent.

This month, insulation maker Kingspan, construction materials giant CRH, and Woodie’s DIY chain owner and builders’ merchant Grafton Group, all highlighted increased costs of raw materials in their interim results.

Mark Kelly, managing director of Turner & Townsend in the Republic, said: “Rising costs of construction, supply chain disruption and skilled labour shortages are quickly becoming the biggest barriers to industry growth.”

Labour costs

Builders believe that labour costs will grow 4.4 per cent and material prices increase by 6.8 per cent over the next 12 months, the firm says.

Contractors surveyed by Turner & Townsend predicted that tender prices could rise 8.9 per cent in 2021, 3.5 per cent next year and 1.6 per cent in 2023.

“Overall average material costs for projects are reported to have increased by 13.4 per cent, while the average cost of labour is reported to have increased by 4 per cent in the last 12 months to July 2021,” the firm’s study says.

Turner & Townsend cautions that it is difficult to predict how those challenges will evolve.

“We are hopeful that some of the adverse affects that these issues are having on the industry will alleviate somewhat over the next six to 12 months,” its report states.

The firm adds that it is important to note that builders’ sentiments reflect what happened during a period when construction had only just reopened from a Government lockdown.

The report adds that the industry was facing “myriad” challenges that were disproportionately and negatively affecting it at that time.