In normal circumstances the construction industry is a bellwether sector for the wider economy and it’s not difficult to work out why. When homes, offices, factories, and roads are being built, it’s the most visible sign of confidence in the economy because people are funding their construction for others who are willing to pay to live in them, use them or employ people to work in them. But circumstances are nowhere near normal, and they haven’t been for some time. Just as the effects of Brexit are starting to kick in, the stop-start impact of the Covid pandemic has made predictions about the health and even the direction of the construction industry – and the wider economy – extremely difficult to make. Just as new figures appeared to show signs of supply shortages easing, Omicron emerged, threatening to scupper any progress made in unblocking bottlenecks. Added to that are soaring energy costs – with warnings that fuel bills could rise by 50% by the Spring ­– which have contributed to inflation rising to levels not seen since the start of the 1990s. With those external pressures bearing down on the sector, it’s understandable that forecasters are expecting material shortages to drive up tender prices this year and next. According to global construction consultancy Mace, UK tender prices are expected to be 4.5% higher this year, compared with last, and 2.5% higher than it predicted last September. While Mace expects inflation to slow next year, tender prices will be 3.5% higher than in 2022 and even the elimination of Omicron and the smoothing of Brexit related road bumps are unlikely to alter that. The main short-term issue for the construction industry continues to be widespread material and labour shortages, which is driving price growth. Last month Arcadis warned that rising energy costs could push construction tender prices up by between 4% and 5%. News from the Timber Trade Federation (TTF) at the start of the month that timber supplies and costs are expected to stabilise – due to more regular demand for housing and imports increasing to pre-pandemic levels – will be of little comfort. Price volatility always leads to delay and inaction, as project sponsors and developers hold off on inviting tenders, more in hope than expectation that the picture in six months or a year will be clearer. Contractors across the UK have already had to contend with rising tender prices caused by higher material costs, with some projects being halted and retendered. According to the Chartered Institute of Procurement and Supply’s latest snapshot of 150 construction companies across the UK, many are reporting delays to decision making by clients, contributing to the slowest sector growth for three months. There was some good news with the number of firms reporting supplier hold-ups falling from 47% in November to 34% in December, as fewer shortages of building supplies improved delivery times, but there’s no guarantee that trend will continue. However, those forecasts don’t take account of measures that can be taken by the industry or government to assist. As the recent vaccine rollout demonstrated, we are at a stage far in advance of where we were at the start of the pandemic in dealing with and working through the pandemic. Business resilience and continuity plans are more developed, allowing companies across the supply chain to work through the imposition of restrictive measures with less disruption. Last year companies were hampered by the triple whammy of fuel supply, lorry driver shortages and supply chain delays while also dealing with the impacts of Covid, Brexit and labour shortages. Many have learned from the experience and put in place contingencies to ensure those factors can be dealt with more efficiently and expeditiously. As costs for fuel, energy, labour, and materials rise, bidders are altering their commercial assumptions, insisting on more flexible change control provisions in contracts, with clearer and more detailed clauses that reflect the potential for external factors to cause disruption and delay. Amid this uncertainty cost consultants are proving their worth by providing valuable insights into likely market rates and supply trends as well as offering advice on cost saving and adding value to projects. Governments are playing their part with the commissioning of public sector infrastructure projects and long-term housebuilding targets. Governments at Westminster and Holyrood have long championed small-to-medium sized enterprises (SMEs) enjoying a greater share of public procurement business but this needs more urgent attention. It’s clear from research and anecdotal evidence that SMEs find the public procurement process challenging and many need additional support with bid submissions. Brexit and the Covid pandemic have introduced changes to the way everyone does business and the construction industry is no different. Given its importance to the economy, it is monitored and used as a gauge of how the wider economy is performing and the message, we should be sending out is that the future can be a lot brighter than current statistics suggest. Ryan Gilluley is managing director of GCM Ltd, a Lanarkshire-based firm of cost consultants, claims and disputes experts for the construction and engineering sectors.

Research from London lettings and estate agent, Benham and Reeves, has revealed that it’s not just London house prices that have climbed considerably in recent times, with the total paid in council tax by London homeowners and tenants hitting almost £5bn a year – £1.2bn more per year compared to just five years.  Last week it was reported that inflation has surged to a 30 year high and with gas and electricity costs set to climb higher yet, the cost of living has become increasingly difficult for many.  Those living in London already face some of the highest house prices and rental values in the nation, with the capital also home to the highest household expenditure and this squeeze on affordability has no different when it comes to the amount of council tax they pay.  Household council tax costs The research by Benham and Reeves shows that the average Londoner pays £1,374 in council tax per year, up 26.8% in the last five years,  Richmond is home to the highest council tax cost per property at £2,065 per year while Southwark has seen the largest increase over the last five years at 36.8%.  Total council tax costs In total, London’s current council tax bill is a huge £4,993,798,878 per year based on the average cost per household and the total number of dwellings across the capital.  Barnet is home to the highest sum of council tax paid on an annual basis, with £258.5m paid across the 146,730 homes in the borough. Croydon is also home to one of the highest total council tax bills at £252m per year, followed by Bromley (£225m), Ealing (£195m) and Lambeth (£1782m).   But it’s not just the increasing cost of council tax per household that is pushing up this total, in the last five years an additional 150,000 homes have been built within London which has contributed to a £1.2bn increase in the total sum of council tax paid across London.  Tower Hamlets has seen the largest annual increase in council tax costs over the last five years, with the total sum paid per year increasing by 48.6%. Southwark (45%), Barking and Dagenham (41.4%), Lewisham (41%) and Croydon (38.9%) are also amongst the boroughs to have seen the largest uplofts in the total sum of council tax paid.  Director of Benham and Reeves, Marc von Grundherr, commented: “Council tax is one of the core costs that many homebuyers fail to consider when looking to buy a home and the sum owed each year can differ drastically depending on where you choose to live.  Much like our home insurance or energy bills, it’s also subject to change and the average London homeowner has seen council tax bill increases squeeze their cost of living by a further £300 a year in the last five years alone. So it’s an important one to consider when it comes to the ongoing affordability of your home, as unlike an expensive phone contract or comprehensive TV package, it can’t be dodged.” Data on council tax costs per dwelling sourced from Gov.uk: Live tables on council tax Data on total dwellings in each borough sourced from Gov.uk: Live tables on dwellingsTotal council tax bill and change based on the current average cost of council tax per dwelling (2021/22) multiplied by the total number of dwellings vs five years previous (2016/17)