With three Prime Ministers, four Chancellors, a new Monarch, and a war in Europe, 2022 was by no means considered smooth sailing. Add the ‘KamiKwasi’ budget of September into the mix and property developers must’ve found themselves at some points asking, “Why bother?”. Material shortages drove the developments costs higher alongside rising interest rates resulting in even contingency funds being no longer sufficient to cover expenses.
2023 so far, isn’t proving to be any different. Costs have continued to rise amid the highest inflation rate in 40 years and it’s even being forecast this year to rise to 18%.
Material shortages are getting worse with the Construction Leadership Council (CLC) reporting back in November that inflationary pressures present the main challenge for building companies producing energy-intensive products such as glass, concrete, cement, plasterboard and bricks resulting in further delays.
However, while these issues are continuing, this year has also presented some new challenges to add further headache to projects with the Office of National Statistics (ONS) reporting that 25% of construction businesses in the UK were experiencing skilled labour shortages.
This was further echoed in December’s Building Engineering Business Survey, backed by trade bodies including the Electrical Contractors’ Association, who revealed that just over half of UK engineering services listed staff shortages as their number one or number two worry, while 52% highlighted shortages in electrical skills as a concern.
There’s roughly 244,000 fewer workers in the construction sector compared to three years ago (ONS), attributable to worker returning to the EU and early retirees. This shortage is particularly affecting SME builders since it takes a minimum of three years to train up a skilled tradesperson.
To add insult to injury the Met Office is reporting that February will see “polar vortex” winds emerge from the North Pole and to put it mildly, the UK is going to be quite cold. Reportedly, the last time we saw the level of cold predicted was the well-known “Beast from the East”.
Some construction operations that cannot be conducted in cold weather, for example mortar and grout need to have a level of heat for the cement to set. Temperatures falling too low will see the process slow or stop completely, reducing the strength of the masonry bond, inevitably causing issues further down the line when the monitoring surveyor pays a visit.
We already know that these are tough times for housebuilders. With staff shortages and rapidly declining weather posing further reasons why they may face cost overruns and delays to their projects, they’ll need to adapt and be creative.
Those of us who fund and support them need to do the same. A traditional development exit is typically designed to be helpful when a scheme is reaching or nearer practical completion, but what about when the project is in its earliest stages? It’s these scenarios, which are becoming more common every day, that Avamore’s Part Complete Development product can be a much-needed lifeline. No matter what stage the scheme is in, even if there’s only one brick been laid, we can step in to offer help.
In a world where new problems present themselves, the same solutions can’t be expected to have an effect. Being able to step in to support borrowers no matter how early in the build is not only required but also, in our opinion, essential.