The cost of building materials in the UK has risen sharply over the past few months, and we have been keeping a watchful eye. There has been much discussion in the trade and national press about this (and noted by our PRS team as we undertake a little DIY ourselves!) so we thought it be useful to share with you what has been going on.
The impact of the pandemic is a widespread shortage of a multitude of construction materials and imbalanced supply and demand has been challenging; as a result, prices have increased both in purchasing prices and rates charged by subcontractors - and in some areas exponentially. Here are some headlines:
Overall project costs would not increase by the same magnitude as the figures cited above due to the high proportion of goods made in the UK and because home improvement work is more labour intensive than other construction sectors. Therefore, it’s the labour cost that dominates, rather than the materials cost. However, there is also a labour shortage given increased demand and the issues raised by Brexit, so this still exacerbates costs.
Considering these spiralling costs it remains vitally important to ensure indexation levels are maintained and tracked on an ongoing basis. Whilst Chubb must strip out some of the “Covid effect” we must ensure adequate consideration is given to market indices and future projections. Extended Replacement Cost is exactly the protection your client needs, so their home will be fully reinstated irrespective of fluctuating market conditions. We will continue to monitor this and advise of buildings indexation changes if required to protect your clients for today and in the future.