Sedgwick, a leading global provider of technology-enabled risk, benefits and integrated business solutions has released its Q1 UK building repair cost review which details how the pandemic has exacerbated issues within the construction industry and includes projections for the coming months.
The review of the building and construction industry market demonstrated the stark issues facing the sector. A 5% increase in building repair costs was evident during the first quarter of this year with many manufacturers operating at reduced output as a result of the COVID-19 pandemic. Sedgwick predicts that cost increases could continue to rise to 7% by the end of 2021. Furthermore, the review outlined that shipping difficulties; a shortage of HGV drivers, which was compounded by Brexit; and an increased demand for construction projects were causing significant problems for building repair contractors.
The review also highlighted the growing issue of material and labour shortages causing problems for insurers with the pricing level of fixed schedules.
We expect the current material and labour supply difficulties to continue for at least 12 months while manufacturers recover capacity and resolve distribution problems. Until then, supply and demand will cause prices to rise, said Peter Wassell, technical director at Sedgwick.
Wassell added “while prices are the utmost concern, the availability of materials is also worrying. It’s possible that as shortages continue, circumstances may arise where it’s not possible to complete a repair without changing the existing finishes or specifications. For example, when there is a major house fire, repairs could be completed to enable reoccupation, however a temporary kitchen might have to be installed, or an alternate roof covering used, as the contractors try and deliver like for like materials. This obviously creates serious problems for customers who are desperate to have their home repairs completed and their insurance claim settled.”
Housing construction is not the only sector to be affected by supply issues. Materials shortages and supply delays have also posed further challenges for claims and underwriting in the agriculture industry. Contractors, who previously would have held quotes for 30-60 days, are now providing quotes for just seven days. At a recent trade show, farm building suppliers advised that the cost to reinstate agricultural buildings is now at an average of £27,000 compared to £18,500 a year ago. This not only impacts the policyholder who potentially faces being underinsured, but also insurers who are seeing costs rise at a rate not seen in many years.
Sedgwick produces the building repair cost review quarterly. To download the review visit building repair cost review.