Labor Shortage and Material Prices? Add Energy Costs to the List of Construction Woes

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Rob

As the world sees construction cost broken records due to lack of labor and materials, Europe warns that a new problem approaches: a massive spike in energy prices.

British Steel, the UK’s second-largest producer, raised prices over several months because of wholesale energy costs. In addition, several other building materials groups--including the firm Tarmac--recently announced “online energy surcharges” to their prices.

Economists say that Europe’s energy problems represent a bellwether for the rest of the world. Noble Francis, economics director of the Construction Products Association, which represents over 24,000 manufacturers, said that rising gas prices inroaded production of bricks, cement, copper, and aluminum; these account for about one-third of construction material costs.

“Clearly, manufacturers will not be able to absorb all the costs themselves, so they will be passed on to contractors that are already suffering from sharp price increases despite the high demand,” he said.

Further, analysts with Arcadis Consultancy foresee that coming electricity prices may have “a seriously inflationary affect.”

Suzannah Nichol, chief executive of trade body Build UK, warned that “some companies will not be able to bear these increased costs during a project and may fold — and other projects in the pipeline will simply become unviable.”

In the end, British Steel says that they’ve “done their best” to absorb the costs and that they “have had to implement temporary surcharges to recover some of this.”

Arcadis says that rising energy prices will strike the United States.

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