3.6% Wage Increase
Construction input costs continue to rise with most indicators recording 1½ to 2% average increases in materials costs year on year. Since June the Pound has weakened against the Euro by some 10%, from a high of £1.30/ euro. This translates to a 2 to 3% increase in overall building costs for a typical project, where 60% of materials are imported from the Eurozone. We are seeing this cost being passed on to projects where exchange rates and prices have not been fixed.
Fuel oils remain at low levels with average 45US$ a barrel recorded over the period. Sterling’s weakness to the dollar has also compounded the cost of imported raw materials above the UK headline rate of inflation.
Labour supply remains constrained with construction sector wage agreements and rises above UK average rates of pay.
Uncertainty developing from Brexit is the continued availability of labour from the Eurozone. Official statistics are variable on the actual percentage of construction workers from Europe in the UK industry, particularly London and the South East is dependent upon a large number of non-domicile workers. Should this workforce return to mainland Europe, this will have an upside impact on labour pricing across the industry.
As yet we are not recording any deflation or pay reductions and therefore are still seeing prices increases.