Supply chain problems hit UK construction profits

Three in five (59%) UK construction companies that have been hit by supply chain issues over the past year have seen once profitable projects turning unprofitable, according to research by insurer QBE.

In a survey of senior leaders in the construction industry, 83% said they had experienced an issue with their supply chain over the past 12 months, while 85% said that they expected supply chain issues to pose a challenge during the next year. 85% said that the cost of importing construction materials increased at a rate higher than inflation over the past year.

A new report from QBE in partnership with Oxford Economics and Control Risks, warns that the outlook for the UK construction industry in 2023 is likely to be equally as disruptive as 2022, with geopolitics and domestic developments continuing to affect access to materials and their prices. Since the first pandemic lockdown, a shortage of materials has been the largest factor constraining construction activity in UK – 89% of respondents impacted by supply chain issues said that they were currently experiencing a shortage.

Andy Kane, portfolio manager for construction at QBE International, said: “Construction firms in the UK have seen continuing shortage of materials and supply chain disruption since the start of the pandemic, so it is no surprise that the majority of those we surveyed have seen disruption which has ultimately impacted profitability. With these challenges set to continue throughout most of 2023, now is the time to take action to limit disruption and protect profitability.

“There are steps that construction industry leaders can take in order to lower their supply chain risk. This includes shifting away from the ‘just in time’ model we have witnessed in recent years to a ‘just in case’ supply chain.”

Many of the construction firms surveyed said they are taking steps such as diversifying supply chains (42%), holding greater stocks of strategically important materials (31%), establishing robust monitoring systems of stocks and suppliers (23%) and nearshoring (17%). However, the survey found nearly one fifth (18%) have not taken any action.

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