May 4th 2018
Can a brick shortage cause long-lasting effects to the construction industry? The National Association of Estate Agents (NAEA) released a report in 2016 highlighting the dire position of the UK construction industry. The report claimed Britain is facing an acute brick shortage and an additional 1.4 billion bricks are needed to meet the growing demand of the UK housing market. While the Brick Development Association slammed the report as 'out of date and unhelpful', it did highlight the increasing demand for bricks.
As the Government has set ambitious targets to build 300,000 new homes a year to improve the housing supply, any shortage of bricks could make it a difficult task to accomplish.
The UK brick shortage can largely be traced back to the 2008 recession. A rapid decline in the housing market associated with the global financial crisis saw brick production decrease by half. Many brick plants around the country were either closed permanently or mothballed.
According to Construction News, a total of 19 brick plants closed between 2009 and 2014, while massive redundancies saw the construction workforce decrease by 15 percent. Britain was left with a stockpile of 1.2 billion unsold bricks. As the housing market got back on its feet, the few brick manufacturers that remained in the UK were faced with a surge in demand due to the Government's 'Help to Buy' scheme, and trying to catch up was a difficult task.
However, the impending Brexit has cast a shadow of uncertainty over the entire construction industry, not just brick manufacturing, but timber and precast concrete to architectural and engineering services.
The Brick Development Association, which represents brick manufacturers in the UK, state that 'The challenges the brick industry faced in 2014 when there was a dramatic increase in housebuilding are now behind us and the industry is confident it can meet the growing demand for its products in housing and other construction projects'. However, it's not quite enough. The UK used 2.4 billion bricks in 2017, although only 1.9 billion were manufactured locally, leaving a deficit of approximately 500 million bricks.
With Brexit looming, do British brick manufacturers have the capacity to fill the growing demand? And what impact could a shortage of bricks have on the construction industry as a whole?
Here's how a brick shortage could severely impact the construction industry.
If brick manufacturers fail to keep up with demand, we could see significant delays on essential construction developments. According to the 2016 report, construction companies faced long waiting periods due to a lack of supply. With 85% of imported clay and cement coming from the EU, the brick supply is only set to get worse with the approaching Brexit. Furthermore, figures released from the Home Builders Federation (HBF) suggest building developments are increasing, with 55,400 homes granted planning approval in London in 2017. If brick manufacturers can't meet the increasing demand, construction businesses, homeowners and their families could potentially be left in the lurch.
Demand for bricks has accelerated since the housebuilding sector returned to normal growth in 2014. According to figures released by the Government, brick sales increased by 26% in December 2016 compared to the same month the previous year. A shortage of bricks could mean brick manufacturers and construction companies look abroad, passing the increased costs of importing bricks and brick components onto the consumers. According to the Centre for Economic Research and Business, a significant portion of the material needed to create bricks is imported from the EU and with new import and export restrictions set to take place under Brexit, the cost of building a brick house in Britain could soar!
According to the Department for Business Skills and Innovation, Britain imported 64% of building materials from the EU. Following Brexit, the cost of materials has already experienced an increase, with the import expenses from the EU increasing by 5.8% in January 2017. If the UK leaves the European Union, which is looking more and more likely, the costs of importing materials could hike, with experts predicting inflation will rise from 1.6% to nearly 4%.
A shortage of brick supplies would have the biggest impact on small to medium-sized builders. In a 2015 report, the Federation of Master Builders (FMB) warned that a worsening brick shortage was hindering small to medium-sized construction businesses, as strained brick manufacturers focused on fulfilling larger orders for more prominent firms. The FBE finds indicated that two-thirds of SMEs were left to wait two months for new brick orders, while almost 16% were left waiting up to six to eight months.
As small and medium-sized construction businesses feel the pressure to deliver housing within strict time frames and tight budgets, builders may resort to timber-based construction. Likewise, a shortage of bricks would likely lead to a dramatic increase in cost for the homeowners, who may be more inclined to use timber frames as opposed to a traditional brick and mortar home.
Over the last decade, the average new UK home has shrunk from 91 square metres in 2006 to 83 square metres in 2016. According to the National Association of Estate Agents, houses have seen an 8 square metre decrease, contributing to 228 fewer bricks per home. In the 1920s, the average home was 153 square metres, almost double the current size, and to put the extent of the problem in international perspective, new builds in other developed countries are almost three times the size. For example, the average new house built in the United States was 204 square metres, and Australia 190 square metres in 2016/17 according to a report from CommSec.
While a decrease in house size could be attributed to a range of factors such as smaller family sizes, affordability issues, or smaller housing blocks, a shortage of bricks could compound the problem.
People across the UK are struggling to meet next month's mortgage repayments. Young families are renting rundown apartments, wondering whether they'll ever be able to afford their own home. The lack of affordable, decent housing is affecting hundreds of thousands of people across the country. An impending shortage of brick supplies, coupled with increasing import costs associated with Brexit could further exacerbate the housing crisis.
The current house price is almost seven times the average person's income and is more than ten times the average income in London. Home ownership has fallen steadily over the last 30 years. In London, more people live in social housing (23%) than those that own their home outright (21%).
While there is no doubt a brick shortage will have long-lasting implications on the construction industry, it's tough to predict the supply in the coming year. The demand is there, although Brexit plays a major role and has the potential to increase the cost of imported materials and bricks drastically.
However, with new brick plants opening in the UK, and manufacturers looking to increase capacity across the board, the reliance on imports will be reduced. But, can local manufacturers keep up with demand? Unfortunately, we will just have to wait and see.