‘Lift Off’ for construction costs

Ongoing inflationary pressures that began earlier in the year show no signs of fading, and there has been a rapid lift-off in construction costs during the second half of 2021. This is likely to continue into next year. Overall outlook for construction remains positive and business confidence is strong. Output reached £46.2bn in Q3, which is in line with long-term trends dating back to 2016, while new orders for the first three quarters of 2021 were also well ahead of pre-COVID levels. In particular, infrastructure and private housing continue to boom.

While pressures relating to the costs of raw materials have eased, they have been replaced by rising energy prices. This will be the main driver of a second wave of inflation across a wider range of construction materials. Products such as bricks, glass, cement and concrete are among the ones most exposed, due to the energy intensity of their manufacturing.