As I sit down to write about current supply chain issues, the prime minister, Liz Truss, has just resigned. This follows on from an ‘astounding’ U-turn on her economic plans a couple of days ago.
Where a few weeks back, I may have been reporting on a level of stability which seemed to be manifesting in the supply chain and contractor market, the only certainty now seems to be uncertainty.
We may be waiting a while longer for clarity on policies and their impacts, but in the meantime, I will take a moment to share what our team at Procure Plus has been observing.
Whilst there is frantic activity to finish in-progress new-build schemes, we are seeing a slowdown in new sites and therefore a reduction in demand. This is no doubt led by a combination of the lack of clarity on rent caps for social housing providers and potential mortgage rate increases for the private sector.
Similarly, in the residential sector, we have seen a large reduction in demand for works as consumers are understandably nervous and are putting potential projects on hold.
The housing refurbishment sector, on the other hand, is very buoyant with a good level of decent homes works, fire safety, and retrofit works progressing.
Many of our contractors work exclusively in the social housing refurb market and have therefore remained busy throughout the pandemic.
They do, however, rely significantly on sub-contractors who typically work full-time for them. There have been retention challenges with competition from a very buoyant residential and development market.
“We will work with housing provider teams to embrace further changes which come our way – as a sector, we are nothing if not adaptable”
We have noticed contractors being very selective with their tendering and have often seen them inflating their returns in line with market conditions.
We are now starting to see this change as the demand in the other areas reduces and the workforce becoming more readily available. This is being reflected in tender participation and returns, and we anticipate that this will continue as the demand for investment refurbishment works continues to increase.
There have been significant price decreases in many commodities in line with the slowing demand.
The impact of these reductions is being offset by the soaring energy costs and weakness of the pound.
This has caused the number of price increases being requested to reduce considerably and is enabling our supply chain team to work with the suppliers to ensure pricing is indicative of the demand in the market place and the collective volume our customers provide.
We are still working with suppliers whose processes rely heavily on large energy consumption such as glass and roof tiles and will be assessing the impact of the commercial energy cap as it evolves.
As ever, we will work with housing provider teams to embrace further changes which come our way. As a sector, we are nothing if not adaptable.
Procure Plus is a Housing Digital Stakeholder and a social housing regeneration consortium that generates efficiencies by leveraging the procurement of construction materials and contractors.