Nine out of ten construction companies say they are unwilling to take on fixed price contracts given the ongoing exceptional increases in raw material costs. That’s according to a new Construction Outlook Survey from the Construction Industry Federation (CIF).
The survey also found that 91% of construction companies believe the economic sanctions arising from the conflict in Ukraine will lead to a further rise in construction costs over the next 3 months, while 85% expect the price of construction projects to increase during that period.
As a response to these issues nine out of ten (89%) construction companies want to see the Government introduce an effective and fair price variation clause into public sector contracts, which would apply retrospectively.
More than four out of five construction companies (82%) also note that the Ukraine conflict has led to the disruption of supply chains in the construction sector. Additionally, 98% of construction companies reported an increase in the cost of raw materials over the last 3 months.
Other points of interest from the survey include almost four out of ten construction companies (38%) saying their turnover increased in the last three months with a similar number (39%) expecting a further increase over the next three months.
While one in three construction companies (32%) also expect to grow their levels of employment over the next three months. Three out of four construction companies (75%) also believe the sector would benefit from attracting more women to work in the industry.
The key challenges identified by the sector are the increased cost of raw materials (88%), access to skilled labour (72%) and fuel (68%).
Speaking in reaction to the survey, Tom Parlon, Director General of the CIF said, “Over the last few months we have been highlighting the issues of hyperinflation in the industry and how that is going to impact on the pipeline of construction activity, particularly when it comes to public tendering. Well, here is the detailed figures which illustrate the extent of these problems.
“Nine out of ten construction companies, which represents the vast majority of the industry, will not tender for fixed price contracts while these increases continue. No one could be expected to commit to a definite price for projects which could take years, when costs are rising on a daily basis. It is practically impossible to estimate where costs are going to go based on the levels of inflation we have seen in the industry over the last 18 months and especially since the turn of the year.
“This also underlines the urgent need for the Government to reform the public works tendering process. There is a clear view in the industry that this needs to happen. Until that is tackled, issues around public tendering will continue, which is likely to have a knock on impact on the advancement of the Government’s various construction programmes,” he concluded.
The Construction Outlook Survey was carried out by Accuracy Market Research on behalf of the CIF. The survey was conducted between 11th and 19th April 2022, with 342 CIF member companies participating.