Product prices ‘softening’ as work levels fall

The prices of most construction products are “softening” amid falling activity, according to the Construction Leadership Council (CLC).

In a statement, the co-chairs of the CLC’s product availability working group said there was “good availability across all products and regions, similar to pre-pandemic levels”.

But John Newcomb and Peter Caplehorn, the respective chief executives of the Builders Merchant Federation and the Construction Products Association, added that “while this appears to be positive news, it is largely driven by a continuing overall decline in construction activity and, therefore, product demand.

“The picture varies across different sectors and regions of the country with demand in some remaining steady or declining only slightly, while others are experiencing more challenging conditions.”

The chairs explained that cancellations and delays to infrastructure projects had reduced the demand for primary asphalts, ready-mix, sand and gravel, while a slowdown in private housebuilding among “volatile” consumer confidence was also a major factor.

The chairs said that sales through builders’ merchants were now falling, and were not expected to pick up until the second half of 2024.

This is leading to “price softening” for most products – the exceptions being those requiring a lot of energy to manufacture, as well as plumbing and electrical products.

Members of the group have highlighted “growing problems of cashflow and liquidity”, with “hardening payment behaviours” between tier one, two, three and four contractors contributing to market pressures, and builders’ merchants experiencing slower payments from customers.

Newcomb and Caplehorn said “everyone in the industry” has a role in addressing these issues.

The chairs noted that some businesses have had their credit ratings downgraded, which was putting additional pressure on the industry due to difficulties obtaining insurance.

The working group is also concerned that labour and skills shortages could be worsened by further job losses, resulting in a weaker supply chain when growth returns.

The CLC said it will lobby the government for support around this issue and has “expectations of some progress” for the Autumn Statement in November.

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