NEWS

News Item

Posted: 26th August
By: rlf

housing

Brick shortage threatens the resurgence of UK construction industry

A recent report by Markit and the Chartered Institute of Purchasing and Supply showed that the UK construction industry is flourishing, with activity across civil engineering and commercial construction expanding quickly and house building being the best performing category, having climbed to its highest level since 2007.

The dramatic growth is due in part to renewed confidence in the economy and the Governments ‘Help to Buy’ scheme, which allows buyers to put down a deposit of just 5% and take out an equity loan from the government for up to 20% of the property’s value, making it an attractive proposition for cash strapped first time buyers.

The scheme has delivered 40,000 new homes in the UK and demand is still high, but a shortage of construction materials such as bricks, concrete blocks and roofing tiles is currently threatening to destabilise the industry, which accounts for 6% of the economic output of the UK.

One of the main reasons behind the shortage is that brick manufacturers were badly affected by the recession. As the housebuilding sector collapsed, brickmakers were left with an enormous stockpile of just over 1 billion unsold bricks – around half a normal year’s demand. The industry stockpiled for a while, but soon had to reduce production of bricks by closing their factories – for example, UK brickmaker Hanson was forced to close five of its plants and reduce its workforce by half and the other two market leaders, Ibstock and Wienerberger quickly followed suit.

However, the latest housing boom has reignited the industry and brick manufacturers are scrambling to reopen redundant plants and boost output. Wienerberger recently announced a significant expansion of its brick manufacturing output, by reopening mothballed factories at Hartlebury and Ewhurst and creating 120 new jobs in the process. The company intends to increase its brick capacity by 200 million over the next twelve months, which is equivalent to 25,000 new homes.

If successful, the expansion should help relieve some of the pressure on the UK housing market, but it will be many months before output will rise to meet today’s demand. This is because capacity in the industry can only be increased through significant investment and the availability of consented mineral reserves, which requires long term planning.

While it is unfortunate that the supply of bricks will take some time to recover, the good news is that the problems aren’t permanent – builders will always need bricks and people will always need houses, and thanks to the ever-growing population and improving economic confidence, the industry should continue to thrive for the foreseeable future.