Lisa Dromgoole on supply chain security

Lisa Dromgoole on supply chain security

February 2021

After a year where the construction industry has faced unprecedented challenges owing to the Covid-19 pandemic and the Brexit process, there is now a prospect of shortages in supply of construction materials, that can cause significant delay and disruption to construction projects.

A recent survey by the Federation of Master Builders found the critical issue facing constructions firms to be the rising cost of materials. The survey reveals that nine in 10 builders face increasing costs, and are experiencing a lack of materials such as timber, plaster, and roof tiles. There are also particular concerns over supplies of white goods for homebuilders, plumbing items, ironmongery, tools, natural stone, and more.

The UK is a net importer of materials: with roughly 60% of imported materials used in UK construction projects coming from the EU. With congestion at UK ports already causing serious delays, it’s no surprise that concerns are running high. Even with a quota-free and tariff-free trade deal now in place with the EU, increased administrative costs and additional bureaucratic processes at the major ports could lead to short or medium term disruption. With margins already tight, this is likely to have a significant impact. New operating procedures to maintain safety is just one of the additional issues that may caused unloading times to increase.

The next 12 months are crucial for the sector, with fierce scrutiny of import/export operations around our major ports. How will that impact the availability and cost of materials post-Brexit and what can the industry expect moving forward?

What can you do to get your business as prepared as possible?
It’s important not to panic. The best approach is to make a full assessment of your business in light of this changing environment and take steps to improve readiness for different outcomes.

Here are some of the key areas that construction company leaders should focus on:
Make it part of your daily routine to stay on top of the latest Government guidance and make any necessary changes regarding importing goods as soon as possible. Think ahead, identify potential problems, and manage the risks.

Take time to understand how any changes could impact current or future projects, in terms of cash flow, project timeframes, quality, profit margins and contracts. It’s sensible to re-assess the probable volume of work and adjust your budget as things become clearer. And remember to review your clients’ vulnerability to any economic slump.

Review your supplier pool and consider if you may need to source alternative or additional suppliers. Ask yourself how your subcontractors are managing the challenges of the last year, including financially.

The sector has a long and fragmented low-margin supply chain, and was part of the economy that was likely to be quickly and heavily impacted by the pandemic. It’s in the interests of all in the sector to help stabilise the UK supply chain. as well as ensuring your projects are able to run as smoothly as possible.

Lisa Dromgoole is Managing Associate, UK at law firm Womble Bond Dickinson. Lisa has over 16 years’ experience in the construction industry, specialising in dispute resolution.
T: 0131 624 8707 E: lisa.dromgoole

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