The last great recession, Brexit, the pandemic and the war in Ukraine have not only led to uncertainty in the economy, but construction procurement challenges, with price volatility, supply chain issues, skilled labour and material shortages, and a sharp increase in energy costs, Constellia explains
All of these major global events marked a period of general decline, and the outlook for construction over the next two years is dismal due to a recession and soaring inflation. So, it is fair to say that there will be highly challenging times for UK construction procurement.
The BCIS indicates the cost of construction is rising at an unprecedented rate
In May 2022, an annual growth rate of 13.8% was recorded, with businesses reporting a sharp increase in labour, materials and equipment, according to BCIS reports.
Although there has been a general stabilisation in the supply of building materials, inflationary pressures brought on by rising energy prices persist. These have a substantial influence on the manufacture of goods and materials.
For example, rates for metal works during 2022 increased to around 25%, structural steel works by 42% and concrete works by 16%.
Impacts in the public sector
Many in the public sector have to scale back their capital projects as increased costs and challenges force a re-evaluation of their programmes. They have to re-prioritise and are sometimes forced to accept that their capital may buy them less than when they started the project or even risk putting schemes on hold.
Outlook to 2023 and beyond
Given the ongoing economic climate, we don’t think 2023 will be any different, and the uncertainty will continue to have additional unforeseeable ramifications.
The construction industry depends on strategic construction procurement planning to ensure that projects are carried out as intended, obtaining works, goods, supplies and products from the best in the market. Due to the unique nature of construction, this plan will vary depending on the complexities of each project; there isn’t a constant set of rules for construction procurement.
How Constellia is boosting construction programmes, even in challenging times
Constellia influences over £1 billion of spend in over 200 public and private sector organisations in the UK & internationally. It has helped organisations save £m’s even during the most challenging economic times.
In the current climate where resources are tight, and costs are continually rising, the ability to strategically source and manage a strong, diverse and robust supply chain has never been more critical. Constellia offers a dynamic market of pre-approved suppliers.
An MSP that enables access to that marketplace and a dedicated ‘Source-to-Pay’ platform.
Constellia’s innovative AEC-neutral vendor framework transforms how the public sector procures construction, goods and services.
Peter Alekkou
Construction Sourcing Specialist
Please note*: This is a contributor profile.
