Despite a decrease in material price inflation, the construction industry faces challenges with reduced brick and block deliveries.
- Government analysis reports a decrease of 12.9% in brick deliveries and 9.8% in block deliveries for June 2024 compared to the previous year.
- A slight month-on-month increase in deliveries offers some optimism, with bricks rising by 0.8% and blocks by 1.6% from May to June.
- Overall material price inflation saw a modest fall by 0.9% over the year to June, driven by non-residential new-build projects.
- Industry experts express caution, highlighting shortages and the ongoing struggle to meet market demand.
The construction sector continues to grapple with the ripple effects of fluctuating material costs and delivery challenges. According to recent government analysis, the delivery of bricks and blocks suffered significant declines, with bricks down by 12.9% and blocks by 9.8% in June 2024 as compared to the same period in 2023. This drop raises concerns about the industry’s capacity to sustain momentum, despite an observed month-on-month recovery with block deliveries up by 1.6% and brick deliveries seeing a slight increase of 0.8%.
Amidst these challenges, the overall material price inflation has managed a decline of 0.9% over the past year leading up to June, largely influenced by the price reductions in non-residential new-build projects, which fell by 2.3%. On the contrary, the sector faces rising costs in new housing projects and repair and maintenance work, each climbing by 0.7% over the same period. Notably, while prices for flexible pipes and fittings have surged by 17.4%, the cost of fabricated structural steel witnessed a significant reduction of 16.2%.
The construction market’s current dynamics are further complicated by the financial struggles reported by Ibstock, a leading brick manufacturer. With a revenue decrease attributed to declining market demand, the company has seen a 20% reduction in revenue over the past year, equating to a £45 million loss in the first half of 2024 compared to 2023. Consequently, Ibstock has been compelled to shut down a Lancashire factory; however, it continues to invest in its West Midlands site, promising the UK’s first certified carbon-neutral brick and expanding its modular capacity with a £50 million investment in a fully automated brick slip manufacturing centre.
Industry voices, including Chris Smith from Aldermore Bank, echo a cautious optimism in response to these conditions. Smith notes the improved economic stability could be interpreted as an opportunity for developers and contractors to embark on new ventures, driven by governmental initiatives to boost housing supply and thus medium-term market demand. However, he also acknowledges the persistent supply issues symbolised by the delivery shortfalls, indicating the sector’s journey to recovery remains in progress.
The construction industry is cautiously optimistic amid price stability and persistent supply challenges.
