UK market view: Q2 2022

Based on the recent increase in material prices, it is once again necessary for us to significantly revise up our tender price forecasts. This was a common theme of last year, as supply chain problems persisted, forcing material prices higher and higher. With China adopting a zero-Covid strategy, many of these issues look unlikely to fix themselves anytime soon.  

Adding to this is the terrible situation in Ukraine. In early March, at the time of our last publication, everyone was hoping there would be a swift resolution to the war, but unfortunately this has not occurred. It now seems likely that this may be a prolonged situation, adding to inflationary pressures.  

So far, the war has triggered large movements in three vital products, most notably, oil, natural gas and steel. UK natural gas spot prices may have come down over the past month, but forward prices, used by many providers to hedge – and also the best indication of what is to come – are still elevated.  

Furthermore, many companies may have already bought much of their energy requirements for this year. Forterra, the brickmaker, and a company which has put up costs around 30% since January, report that they have done this. While it does remove volatility and uncertainty, it means they won’t benefit from any fall in prices.  

Additionally, and partly due to these energy price rises, steel rocketed in March, with rebar increasing by over 30% in the month. Overall, the construction material price index rose 5% in March and is now almost 25% higher than a year ago. With labour costs also starting to pickup, we have no option but to increase our tender price forecast to 8%.  

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