Rising Building Costs – Are You Protected?
Thanks to a number of factors, building costs are rising. And the costs are rising so quickly during the course of a long construction project, then even day one inflation provision might not be enough to cover the rising costs of construction during the course of a project. Even before the cost of living crisis hit, people were already likely to pay £1,300 more on average for a room makeover compared to 2021. So why are building costs so high, and what can you do to ensure you’re protected from price rises?
What is Causing Rising Building Costs?
There are a few different reasons why building costs are rising at a rapid rate, and it’s the perfect storm of inflation, supply chain issues, the rising cost of materials and customer demand.
When it comes to the UK, this is down to a number of contributory factors, including the perfect storm of Brexit and Covid-19. Brexit has led to a lack of availability in cheaper labour, whilst also causing a bit of supply chain disruption at the channel crossing.
The worldwide pandemic led to further supply chain disruptions, which made the availability of some materials more scarce, which in turn drove up prices. And with the pandemic seeing many people confined to their houses, the demand for DIY-related products also increased, which in turn saw less availability for some construction tools and materials.
In 2022, the biggest factor you have to look out for when it comes to building costs is inflation. Current inflation has been caused by supply chain disruptions and rising energy costs, which are having a knock-on impact on the costs of goods and services. If energy is used to manufacture and deliver materials, then the cost of buying materials for your project will increase. This is just one example of rising costs in the construction industry.
The rise in prices means that everything becomes more expensive, and someone has to pay for it down the line. The typical solution is to pass on price rises onto consumers, but with the current cost of living crisis, this could lead to customers rolling back on their construction projects in order to save money. And if the construction workforce is feeling the pinch thanks to inflation, it’s likely they’d ask for a rise in line with inflation to keep up, another building cost firms will have to factor in.
How [broker_name] Can Help
Usually, for a longer project, you might have inflationary provision cover built into any insurance you have, factoring in what inflation will do to costs over the course of the project. If it spans over a number of years, it’s difficult to predict what the prices and costs would be for the final build when inflation is considered.
However, the quick rise in inflation in the past year has meant that any inflationary provision you have may not be sufficient to cover the rapid rise in building costs. So what can be done?
The best way is to work with Dover Street Insurance Brokers to go through your current policy to ensure you are protected from rising building costs in the uncertain landscape we’re now in inflation-wise. Being better protected will allow you to budget and quote with confidence, knowing that even if inflation does have an impact, you’ll be protected through inflationary provision cover.
You can call us on 0208 057 4130 or write to us to start the process off to ensure that your insurance policy gives you adequate protection when taking on a construction project, especially if you think the current rise in business costs will have an impact or currently is having an impact on your balance sheet.