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Project Starts Fall Sharply As Recession Nears
Underlying work commencing on site has fallen 35% against the preceding three months to August and 30% lower than a year ago – and residential starts...
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Ukraine War Causing UK Construction Insolvencies
Following the release of the latest UK Construction PMI on 6 July, Joe Sullivan, partner at MHA, believes the full inflationary effects of the war in Ukraine have now worked their way through the system, pushing more companies into insolvency.
He does believe that supply constraints will stop house prices falling dramatically but conversely, house building could slow down.
“In recent months we had seen material prices start to level off but we’re now seeing the full effects of the war in Ukraine work their way through the system, driving up prices and ensuring we continue at these price levels for some time.”
– Joe Sullivan
Partner, MHA
Materials and tools
“Although the war began on 24 February, it took time for the range of effects to work their way through,” continues MHA’s Sullivan. “Together with these input cost increases, further shortages of raw materials like timber and manufactured goods such as generator components are behind the growing number of insolvencies in the construction sector.
“The remarkable success of the residential property market continues but the rate of price increases is now slowing. Vendors are trying to pre-empt a recession by becoming more reasonable in the prices they seek, trying to tie up a deal quickly rather than holding out for higher more.”
Wages
Sullivan adds: “Further wage increases are inevitable. Contractors are under pressure not only to maintain their current head count for existing work but to retain the individuals with the appropriate skills necessary for opportunities available for tender.
Delivery pressures
“Contractors are making progress with energy efficient delivery but the cost of investment and management time in achieving sustainable goals is starting to filter through the supply chain. This may preclude some subcontractors from involvement in future work, so firms need to pay great attention to this area, to stay relevant and to future proof their business.”
Picture: The impact of the war in Ukraine on materials and tools and thus house building is being seen more clearly according to accountancy group MHA.
Article written by Cathryn Ellis
14th July 2022