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The EC Harris/Construction News Contractors' Input Cost Index


THE BIG double-digit increases in steel prices, which were in evidence at the start of the year, have slowed right down in the past three months and as a result contractors' input costs in the UK rose by 'only' 1.8 per cent over the past quarter.

The year on year increase of 9.7 per cent in the 12 months to September 2004 remains high, primarily because of the rises in the first half of the year, according to the EC Harris/Construction News Contractors' Input Cost Index.

Whether demand has slowed in China, or the market has reached its own level after the panic of the first six months of 2004, the overall result has been that reinforcement prices rose by 3.1 per cent during the third quarter, while structural steel prices increased by 5.2 per cent.

Despite the slowdown, year on year increases were 38 per cent for rebar and 18 per cent for structural steelwork. Further increases in steel prices are due to come into effect during the latter part of the year, but whether the price rises will stick remains to be seen.

Labour rates across the country have slowed after the surge during the first half of the year and are up 0.8 per cent during the past quarter, and up 5.5 per cent since September 2003.

Year on year price increases for most materials nationally have continued to rise at a rate well above retail price inflation (RPI): brick prices increased by 7.5 per cent, block prices by 4.8 per cent and timber by 3.1 per cent. Only ready-mix prices reflected RPI, with an increase of 2.4 per cent during the past year.Daily rates for skilled labour rose by 5.5 per cent across the country over the same period.

Prices continue to show large regional variations.Wales still has the lowest prices, some 8 per cent below the UK average, with contractors in the principality benefiting from the lowest blockwork rates and lowest wage rates.

Daily rates of £113 for bricklayers and £115 for carpenters are 20 per cent and 15 per cent respectively below the national average.

Unusually, contractors in Wales are paying the most for structural steelwork, at £1,295 per tonne, some 11 per cent higher than the average.

Prices in London continue to lead the way: the capital has the highest prices for concrete, bricks, blocks and skilled labour.As a result contractors' costs in London are 10.3 per cent higher than the national average.

Continued shortages of skilled labour in London have led to an increase in daily rates of 4.4 per cent in the past three months, with bricklayers on £159 and carpenters on £156 per day.

This last average figure excludes the £240 daily rate put forward by one contractor as being the price he has to pay to get carpenters working on his site.

Reinforcement prices in Northern Ireland and Wales are still the highest in the UK with rates of £456 and £421, against an average cost across the UK of £403 per tonne, although the rates in Wales have actually fallen by 3 per cent over the past three months.

The region showing the greatest increase in costs over the past three months is Scotland, where 15.5 per cent increases in structural steel prices, 13 per cent increases in block prices and 12 per cent increases in labour rates contributed to a quarterly rise in input costs of 9 per cent.

Costs in the Channel Islands have now picked up, with an increase of 4 per cent during the past three months.

This is fuelled by substantial increases in the price of concrete (4 per cent), rebar (9 per cent), structural steel (6 per cent) and timber (7 per cent).

Labour rates on the islands are well below the UK average.

Nevertheless, rates on the islands are some 38 per cent higher than the rest of the UK, with little chance of that figure coming down, while concrete products are twice the national average.

Looking ahead, steel prices will continue to soar.Already Corus has announced a £30 a tonne rise in October, and the supplier is understood to be pushing for a £50 a tonne increase in the New Year.