Supply chain woes leading to profit losses for UK construction

In a survey of senior leaders in the construction industry*, 83% said they had experienced an issue with their supply chain over the past 12 months, while 85% said that they expected supply chain issues to pose a challenge in the next 12 months.

 85% said that the cost of importing construction materials increased at a rate higher than inflation over the past year.

According to a new report from QBE Business Insurance in partnership with Oxford Economics and Control Risks, Supply Chains and the UK Construction Sector, the outlook for the UK construction industry in 2023 is likely to be equally as disruptive as 2022. Geopolitics and domestic developments will continue to affect access to materials and their price.

Since the first pandemic lockdown, a shortage of materials has been the largest factor constraining construction activity in UK. Nine out of 10 (89%) of respondents impacted by supply chain issues said that they were currently experiencing a shortage of materials.

Andy Kane, portfolio manager, construction, QBE International said: “Construction firms in the UK have seen continuing shortage of materials and supply chain disruption since the start of the pandemic. Therefore, it is no surprise that the majority of those we surveyed have seen disruption which has ultimately impacted profitability. With these challenges set to continue throughout most of 2023, now is the time to take action to limit disruption and protect profitability.”

He continued: “There are steps that construction industry leaders can take in order to lower their supply chain risk. This includes shifting away from the “just in time” supply chain model we have witnessed in recent years to a “just in case” supply chain.”

In addition, businesses can take steps such as using technology to automatically order supplies when stock levels go below a certain point, look to diversify suppliers and, where higher input prices are the likely fallout from supply chain disruption, consider adding a cost escalation clause to future contracts.

Many of the construction firms surveyed said they taking steps such as diversifying supply chains (42%), holding greater stocks of strategically important materials (31%), establishing robust monitoring systems of stocks and suppliers (23%) and nearshoring (17%), however the survey found nearly one fifth 18% have not taken any action.

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For further information contact:

Sandra Villanueva, Corporate Communications, QBE, 020 7105 5284, Sandra.Villanueva@uk.qbe.com

Alexis Burris, Corporate Communications, QBE, 020 3465 3921, Alexis.Burris@uk.qbe.com

About QBE

QBE helps businesses build resilience through risk management and insurance.

QBE European Operations is part of QBE Insurance Group, one of the world’s leading international insurers and reinsurers and Standard & Poor’s A+ rated. Listed on the Australian Securities Exchange, QBE’s gross written premium for the year ended 31 December 2022 was US$20 billion.

As a business insurance specialist, QBE European Operations offers a range of insurance products from the standard suite of property, casualty and motor to the specialist financial lines, marine and energy. All are tailored to the individual needs of our small, medium and large customer base.

We understand the crucial role that effective risk management plays in all organisations and work hard to understand our customers’ businesses so that we offer insurance solutions that meet their needs – from complex programmes to simpler e-trading solutions – and support them in minimising their risk exposures. Our expert risk management and rehabilitation practitioners focus on helping customers improve their risk management so that they may benefit from a reduction in claims frequency and costs.

*Survey carried out by Opinium in partnership with QBE among a sample of 100 senior leaders working in the UK construction industry in February 2023