WHITE PAPER UK Construction Pricing Update Q2 2021 The construction industry continues to exist in a state of rapid change. Media outlets have provided reports on price increases across several products, and Verisk’s property pricing departments have researched and reported on quarterly price increases within specific markets. While the numbers from the media and Verisk may not always match, the key takeaway is that several major price adjustments have already occurred throughout 2021.

Construction output has recovered to pre-pandemic rates. However, the balance of work has changed. New work has decreased, while the rates of repair and maintenance projects have increased.1

Recently, reports have emerged of a shortage of lorry drivers. This shift is expected to negatively impact the flow of products into the UK, which could lead to empty shelves in retail outlets.2 Simultaneously, retailers have generally begun to oer higher wages. Combined, the two forces will ultimately increase the consumer cost of products.

1 https://www.ons.gov.uk/businessindustryandtrade/constructionindustry/bulletins/constructionoutputingreatbritain/april2021 2 Why is there a shortage of lorry drivers? - BBC News

UK Covid Update – Q2 2021 2 RAW MATERIALS

Oil prices3 have continued to increase as a result of rising global demand and OPEC’s decision to not increase oil supply into non-OPEC countries. Oil prices are expected to continue to increase across the remainder of 2021.4

Oil Price per Barrel WTI $70 $60 $50 $40 $30 $20 $10 $0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Jan Feb Mar Apr May 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2021 2021 2021 2021 2021

3 https://www.macrotrends.net/2516/wti-crude-oil-prices-10-year-daily-chart 4 How High Can Oil Prices Go In 2021? (forbes.com)

UK Covid Update – Q2 2021 3 While raw metal prices have continued to increase, copper market prices in particular have risen by 20% over the past 3 months. This trend has occurred alongside a weakening of the UK to US dollar exchange rate.

Copper Raw $(USD) v £(GBP) $12,000.00 £8,000.00 £7,000.00 $10,000.00 £6,000.00 $8,000.00 £5,000.00 $6,000.00 £4,000.00 £3,000.00 $4,000.00 £2,000.00 $2,000.00 £1,000.00 $0.00 £0.00 Jul 20 Apr 21 Jan 21 Feb 21 Mar 21 Oct 20 Jun 20 May 21 Sep 20 Dec 20 Aug 20 Aug Nov 20 May 20

Copper Per Tonne - $ - (USD) Copper Per Tonne - £ - (GBP)

The largest price movements this quarter have occurred in the metals markets. Our pricing research has confirmed this trend. While price increases across copper cabling and copper piping have happened relatively slowly over the last year, the last three months have seen more rapid rises in costs. On average, copper wiring has increased by 20.4%. This increase has also been reflected in copper piping, where an average price increase of 15.06% has occurred over the past three months.

Copper Wiring Price Changes Over Time £300

£250

£200

£150

£100

£50

£0 Q3 2020 Q4 2020 Q1 2021 Q2 2021

1.5mm dual core cable 10mm dual core cable 2.5mm dual core cable 6mm dual core cable

UK Covid Update – Q2 2021 4 Timber

The media has reported rises in timber prices over the past month—reporting that reflects accounts of general price increases from Travis Perkins and other retailers. However, our pricing team has observed that these pricing trends have occurred only gradually over the past year. In the last 12 months, we’ve seen the costs of skirting boards rise by 12% and oriented strand board rise by 26%. All remaining materials have increased at slower rates.

There are several reasons for the increase in timber costs. Global demand for timber is at an all -time high, with many countries using building projects as a method of constructing their way out of the economic eects of COVID-19.5

Additionally, the USA increased timber imports from Europe to counter their own shortages, leading to a reduction of supply to Europe and corresponding price increases.6

Timber Products Price Changes Over Time £25

£20

£15

£10

£5

£0 Q3 2020 Q4 2020 Q1 2021 Q2 2021

Architraves Skirting Chipboard Flooring MDF Sheet Oriented Strand Board Polywood – Exterior

5 http://www.nytimber.co.uk/news-timber-price-rise.php 6 https://www.bloomberg.com/news/articles/2021-05-12/u-s-lumber-importers-are-driving-buying-mania-for-european-wood

UK Covid Update – Q2 2021 5 MATERIALS

For the second quarter running, our pricing department’s research has shown price increases across the UK. According to our research, there is a lack of supply across smaller retailers for several key products, as well as general price fluctuations.

Our regional prices are measured using 8 data points: 4 from national retailers (B&Q, Travis Perkins etc.) and 4 from local retailers and builders’ merchants. All of these data points are analysed before the rates are published. In most quarters our data clusters are close together—this has not been the case this quarter, with some retailers increasing their prices very early on and other retailers waiting to react.

As mentioned above, the highest price increases have been observed across metal and timber products. The quarter has shown consistency in price increases across material types.

Price Movements by Category

25 %

20 %

15 %

10 %

5 %

0 %

-5 %

Diesel Paint Roofing Carpets Sealants Masonry Electrical Plumbing Wallpaper Insulation Floor Tiles Wall Tiles Viny Flooring First fix Joinery Wood Flooring Second Fix Joinery Plaster Board and Mix

Our customers and the media have noted that predicted increases in the price of paint over the past few months have not yet materialised. We have, however, observed a series of paint price increases over the past year. Based on this trend, it is still likely that price increases will appear over the next few months. However, due to the increase in home renovation projects, retailers may choose to not pass increased costs onto their customers during the increase in demand.

Paint Price Changes Over Time £12 £10 £8 £6 £4 £2 £0 Q3 2020 Q4 2020 Q1 2021 Q2 2021

Emulsion Vinyl Colour Emulsion Moisture Resistant Emulsion Vinyl White Gloss Woodstain Undercoat

UK Covid Update – Q2 2021 6 LABOUR

The pricing department’s research has observed a decline in the general number of adver- tised labour jobs. This decline has been particularly prevalent in Northern Ireland. It was noted in our research that demand has increased for decorators, tilers, and roofers, which is in line with information from the Oce of National Statistics that shows home renovation projects have increased by 16% since the start of the first lockdown.7

The majority of trades experienced wage increases, and any decreases were small in nature. The most likely reason? Home improvement projects and recovery rates increased following wage reductions at the start of 2021.

Wage Movements by Trade

4 %

3 %

2 %

1 %

0 %

-1 %

-2 %

Tiler Joiner Roofer Cleaner Plumber Renderer Plasterer Electrician Demolition Brick Layer Decorator Scaolder Carpet Fitter Plant Operator General Labourer

7 https://www.ons.gov.uk/businessindustryandtrade/constructionindustry/bulletins/constructionoutputingreatbritain/april2021

UK Covid Update – Q2 2021 7 The largest wage increases were in the areas hardest hit by migrant workers leaving the UK, London, and the South East of England. Any average wage decreases were relatively small compared to the increases we have seen.

Wage Movements by Area

4 %

3 %

2 %

1 %

0 %

-1 %

-2 % ENLO ENMO ENNE ENNW ENSE ENSW NINI SCSC WAWA

We are in a period of rapid change in the construction industry. As ever, we are being diligent to ensure our pricelist is an accurate representation of the market. If you have any questions, please feel free to contact us at [email protected].

UK Covid Update – Q2 2021 8 verisk.com

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