While building contractors will inevitably be expected to pay more for their products, more than three quarters of building product manufacturers do not expect to be able to pass on the full cost rises to their customers.
The costs of energy, fuel and materials have risen significantly over the last twelve months and are expected to continue to rise in the next 12 months according to a survey by the Construction Products Association. Product manufacturers reported that these increases will simultaneously erode their own margins and also raise construction costs, at a time when the construction industry is in enough trouble already.
CPA economics director Noble Francis said: "More than three quarters of manufacturers reported that costs rose significantly over the last 12 months, with the last three months seeing a particularly sharp increase. Cost rises were mainly due to fuel, but increases in the prices of copper, steel and plastics also contributed to the rise. Looking ahead, the vast majority of manufacturers also anticipate that costs will continue to rise significantly over the next year, which will reduce margins further and push up costs of construction. The Association is forecasting that output will fall by 2% during 2011 due to the impact of the public sector spending cuts, so this will exacerbate problems for the industry."
Key points from the survey include:
- 77% of manufacturers reported that input costs rose significantly during the last 12 months
- 59% of manufacturers stated that input costs rose significantly during the last three months
- 97% of manufacturers reported that fuel costs rose significantly over the last 12 months
- 65% of manufacturers anticipate further significant rises in the price of fuel during the next 12 months
- 75% of manufacturers stated that gas prices had risen significantly during the last 12 months
- 43% of manufacturers anticipate that gas prices would increase significantly during the next 12 months
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