Building materials market: Implications for new farm projects
© Tim Scrivener After a period of rocketing prices, the rate of inflation for building materials is finally cooling, although many prices remain stubbornly high.
Monthly figures published by the Department for Business and Trade (DBT) show construction material inflation initially fell during the Covid-19 pandemic in 2020, then rocketed in the following two to three years due to a combination of factors.
Pent-up demand and supply issues post-pandemic first pushed prices up, but this was compounded by Brexit and import issues, then the war in Ukraine and the associated spike in energy costs.
See also: What to check before starting a permitted development project
Steel manufacturing
James Towers, senior associate building surveyor in Galbraith’s Edinburgh office, says steel manufacturing was particularly affected, with prices increasing by about 50% at the beginning of 2022 following Russia’s invasion of Ukraine and the subsequent spike in energy costs.
“Steel prices are becoming less volatile and are reducing, but not to a huge extent, so prices are still 25-30% up on 2021-22,” he says.
Timber prices also saw a huge increase, rising by 30% between 2021 and 2022, with some reports of buyers stockpiling materials, leading to limited availability.
Again, that market has stabilised through 2024, with prices reducing for some products.
On a monthly basis, the DBT figures show the most significant price differences between May and June 2024 were seen in imported plywood (-2.8%), and imported sawn or planed wood (-2.1%), as well as steel rebar for concrete (2.5%).
“Information we’ve gathered from our projects and other research suggests that general building material costs in the past four years increased by around 35-40%,” says James.
“It has been a very tricky time, but fortunately, there has been a slowdown in the past 12 months as things are levelling out, perhaps with a 3-4% decline overall.
“Although, that’s still nowhere near the hike witnessed after Covid.
“This cooling-off assists us with budgeting, as there was a time when contractors would only hold prices for brief periods, sometimes as short as 48 hours.”
Therefore, prices for many materials remain comparatively high, and Galbraith believes it is unlikely they will return to pre-pandemic levels. Indeed, prices for some materials, such as insulation, continue to increase.
Government figures also show notable increases in the cost of flexible pipes and fittings (17%), and metal doors and windows (16%) in the 12 months to June 2024.
In contrast, concrete steel reinforcing bars (-11%), gravel, sand, clays and kaolin (-13% including aggregate levy), and fabricated structural steel (-16%) were among the materials showing the greatest price reductions year-on-year.
“An agricultural steel portal frame shed is quite a simple construction, but despite recent reductions, the material costs of the main components of these buildings have gone up so much in previous years, you could still be looking at a 30-40% increase in construction costs compared with building the same shed five years ago.
“This does shock those who haven’t had any building work done since 2019.”
Shop around
Mike Horner, Carter Jonas senior project manager, recognises the building materials market has cooled in recent months.
He notes there is better availability of contractors, with many offering lead times down to a few months, rather than the 12-18 months seen previously.
For any building project, he recommends getting at least three quotes, and urges farmers to make sure they are clear about what is and is not included when speaking with suppliers or contractors.
“When finding a contractor, the most important thing is to go with one you feel comfortable with, so meet them on-site to make sure it’s someone you can form a team and with,” he says.
When sourcing materials for farm projects, give contractors a clear idea of what is required in terms of material specifications and quality, and ask for samples of what they propose to use, where appropriate, he adds.
Clear information and communication at the outset can help avoid problems and additional costs or delays further down the line.
Below is some general advice when planning building projects:
- Seek a range of competitive quotes – three minimum. Ask for local recommendations
- Be clear about what will be done in-house and what will be sub-contracted and who to
- Meet contractors on-site
- Ask to see references and/or examples of previous work or projects
- Check financial history via Companies House
- Be clear about the specifications required for buildings, fittings and fixtures
- Understand what warranties are available on materials such as cladding or waterproofing, and whether warranties are transferable to another contractor should the need arise (for example, contractor goes out of business and cannot complete the job)
- Be careful if buying materials directly yourself while employing a contractor to do the work – materials need to be stored and there could be wastage or delays incurred if plans change as the build progresses. Generally, it is better to get contractors to source materials.
Check insurance valuations
The sharp rise in material costs over the past five years may have a significant impact on insurance reinstatement valuations for farm buildings and houses, says James Towers.
Where the insurance “rebuild/reinstatement” valuation for farm buildings and/or houses was last done several years ago, they tend to only increase by the general rate of inflation, and therefore have not kept pace with building material inflation.
Consequently, some insurance rebuild valuations could now be too low if they have not been reassessed, in some cases by as much as 20-30%, leaving farmers underinsured, he warns.
“This doesn’t just account for a full loss of a building, it affects partial damage, too.”
Therefore, Galbraith recommends getting all buildings properly inspected and valued for insurance purposes to accurately reflect the cost of rebuilding at current prices should the worst happen.
The Royal Institution of Chartered Surveyors suggests that buildings should be reassessed by a qualified surveyor every three years to ensure any changes are captured and material inflation is accounted for.
If not, and farmers are found to be underinsured in the event of a claim, this could significantly limit the payout available.
Beware health and safety requirements
Farmers planning a building project are reminded to check their obligations under the Health and Safety Executive’s Construction Design and Management (CDM) Regulations 2015, which govern the way all building projects – large and small – should be planned.
Understand the rules
This applies whether farmers are using a contractor, or doing work in-house themselves with farm staff, says Mike Horner.
“Once you understand the rules, it’s not actually that onerous, but it’s certainly something to be aware of as it could come back to bite you if you haven’t thought about it.”
Under the CDM regulations, even if a contractor is being used, the farmer, as the client, has certain responsibilities from a health and safety perspective.
“A farmer employing a contractor to convert a farm building, for example, needs to ensure contractors have things such as asbestos reports and risk assessments in place, and are aware of where services are, and anything else that could cause a health and safety risk on that site,” says Mike.
“As the client, you need to be satisfied that the person you’re employing is competent to act in a safe way and comply with the CDM regulations.”
Failing to do so could potentially leave farmers at risk in the event of an accident occurring on-site.
Using a contractor approved by certification bodies such as Safe Contractor, Achilles, Veriforce Chas, or others, is a good option, as this gives some verification of their health and safety credentials.
Where work is being done “in-house” without using a contractor, the CDM rules still apply.
“If it’s not something you’re used to dealing with, it can seem a bit difficult to approach, but there are a lot of independent health and safety advisers around who can provide advice and assistance,” says Mike.
“Again, it’s worth checking their qualifications and affiliations before engaging them to be sure they are working to current legislation.
Risk assessment
“The initial involvement with a health and safety adviser might cost £500-£600 to assess all the risks, produce a risk assessment and talk through your responsibilities, but thereafter it becomes more of a retainer to check nothing has changed.
“It’s a cost nobody really wants to take on, but without it, you are really exposed, particularly if you’re a farmer employing a few workers to do the work themselves – at that point you’re deemed to be solely responsible for their health and safety.”