Construction sector dealing with surge in demand, materials supply, rising prices and labour shortages
In recent weeks, problems around supply chains have been causing headaches in different ways. Consumers are often faced with empty supermarket shelves missing various items, from cat litter to sparkling water, and drivers are panic buying fuel. Some building projects are struggling to get started or to advance because of shortages of certain materials. This situation is seen to have arisen as a result of a ‘perfect storm’ of Covid-19, with things such as the ‘pingdemic’ causing many to isolate, and Brexit, with a lack of certain workers in the UK, including haulage drivers.
Euan McSherry, partner and head of dispute resolution at law firm Aberdein Considine, says: “We’ve had a lot of enquiries in relation to the materials side of things. The reason is there is now big global demand for materials following the slowdown.”
He explains that the drop in demand near the start of the pandemic led to a pause in the production of some materials. Now construction has cranked up again, there is a shortage. He adds that this is coupled with transportation issues in the UK making it difficult to get materials towhere they are needed on time. “We’re getting questions on the impact of this on construction projects that are about to start or are moving to different phases,” says McSherry. “The question around materials is a significant one. But it’s not uniform. Some contracts will have factored in a price and that could lead to big losses for suppliers, while others won’t have agreed a price which will also lead to difficulties. All of these questions could lead to potential disputes.”
Elliot Robertson, chief executive officer of The Robertson Group, a family-owned construction business, says that despite challenges the sector is now performing well and the Scottish Government has recognised its importance. He explains: “The industry is not experiencing its current challenges from the impact of just one event in the last 18 months. There are a number of factors which combined are creating the current impact: Brexit and Covid-19, material demand, logistics constraints and UK labour supply. However, all of these challenges can be addressed, and the opportunities outweigh the current challenges that we are facing.”
Economist Graeme Roy, Dean of External Engagement in the College of Social Sciences at the University of Glasgow, believes that in many ways the impacts of Brexit have been hidden by Covid-19.
He says this is partly because the effects of the pandemic are much greater in the short run. He adds: “That being said, there are clearly challenges emerging, such as rising prices for materials in construction through to food prices.” He warns the bigger challenges are over the longer term. They include fewer opportunities to grow trading markets, fewer opportunities to collaborate on innovation and R&D projects and the loss of EU migrants.
Karen Harvie, senior associate with Aberdein Considine, says: “One of the things furlough has done is mask the effects of Brexit. I think the wider economy will be more concerned about that than the end of
furlough.”
But furlough coming to an end will clearly affect certain individuals and employers, particularly in sectors such as aviation and tourism where the scheme was being very widely used.
Harvie says: “We’ve been getting a lot of queries from people who have had their contracts changed, but
I’ve not yet had an uptick in people asking about redundancy. I suspect that will be on everyone’s minds as furlough stops.”
Partner content produced in association with Aberdein Considine.