Iran War to Drive Up UK Building Costs, Warns Travis Perkins CEO
The chief executive of the United Kingdom's largest builders' merchant has issued a stark warning that building costs are poised to rise significantly due to the conflict in the Middle East and the resulting spike in energy prices. Gavin Slark, the new boss of Travis Perkins, stated that manufacturers will be forced to increase prices to cope with higher energy bills, directly impacting construction projects across the nation.
Energy Price Surge Forces Supplier Action
Slark revealed that several of Travis Perkins' suppliers have already contacted the firm to indicate they are considering price hikes to combat escalating energy costs. Many businesses fear these costs will rise further when they renew their contracts. "I think our customers understand that energy prices are rising significantly, therefore the cost price of the materials will be rising," Slark explained. He emphasized the immediacy of the issue for energy-intensive industries, noting, "If you're very energy intensive then it's a short-term pricing issue and it happens very quickly in terms of the price hitting your business. We're very alert to it and we're very aware of what the impact will be."
Construction Industry Already in Decline
The Builders Merchants Federation (BMF) has corroborated these concerns, reporting that sales of construction supplies began to slump even before the recent conflict. According to BMF data, building material sales fell by 7.2 percent year-on-year to January, with costs already 40 percent higher than pre-pandemic levels. John Newcomb, the BMF's chief executive, warned, "If building materials are not being sold, construction is not taking place. We are facing a major 'cost of doing business' crisis, and there are no green shots of recovery on the horizon."
Government Housing Targets at Risk
This crisis threatens the Labour government's pledge to build 1.5 million homes before the next general election. Multiple sections of the construction industry have warned that these targets are infeasible under current conditions. Earlier this month, the boss of a leading materials supplier called the target impossible "the day it was announced" and urged the government to support the UK's construction industry, which is experiencing falling sales. Small and medium construction firms have described themselves as being in an "existential crisis," with average sales dropping more than 40 percent between 2021 and 2025.
Travis Perkins Financial Struggles
Travis Perkins itself has faced significant financial challenges, with its pre-tax loss ballooning to £135 million, more than triple the £38 million loss from the previous year, as revenue fell by one percent. The company has invested in a turnaround strategy over the past year, implementing a new IT system and reducing administrative overheads. Slark stated, "We will maintain our disciplined and selective approach to capital allocation as we navigate our way back to better market conditions."
The combination of geopolitical tensions, energy price volatility, and pre-existing industry struggles paints a bleak picture for the UK's construction sector, with rising building costs likely to hinder both private projects and public housing initiatives in the coming months.
