The Construction Products Association has warned the government to sort out the UK’s energy supply as costs begin to bite into the margins of contractors.

Roy Harrison, president of the association, told members at the organisation’s annual lunch this week that firms had to be able to rely on a secure energy supply to compete.

He said: “If companies are going to continue to invest in the UK the government must set a clear framework for ensuring industry has a secure supply of energy at prices that compare favourably with other industrial countries. It is not a sustainable solution to drive industry out of the UK to countries where environmental standards are not as high and from which products are exported back to the UK.”

Harrison said that industry faced an unprecedented increase in the cost of energy.

He said: “Twelve months ago those renegotiating contracts faced increases of 40% in energy prices – a disaster at the time. In the past couple of months I have heard that increases are now typically 60%. One of our major companies reported to me that over the last two years the price it paid for gas and electricity contracts had doubled.”

Harrison’s call came as Building revealed that increases in energy prices were squeezing the margins of contractors, suppliers and distributors.

The increases include the following:

  • Gas oil, or red diesel, used in non-road vehicles such as diggers. The price for this has nearly doubled to 40p a litre over the past 18 months, costing contractors an estimated £2000 per site per day
  • Petrol-intensive materials such as cement and readymix cement, which are set to rise 10% in January
  • Petrochemical product polythene, which has increased 8-12%, or £60 extra for a pallet of 25 4 × 25 m rolls.

The gas oil problem is accentuated by price volatility. Price increases used to vary by about 0.5% but can now be as much as 10%. This is making tender bids difficult to price. Similar volatility in electricity prices has led to one contractor to forecast that it could have underbid its projects by as much as £1m this year.

Last week Cemex wrote to customers to say that its cement prices would rise by £6.45 from 1 January. A spokesperson said: “We can confirm that due to continuing cost pressures, in particular fuel and transport, we have informed customers that it is necessary to apply a price increase for cement products.”

Materials distributors are not passing all the additional costs of items, such as polythene, on to contractors because they want to remain competitive.

Vaughan Burnand, managing director of contractor Shepherd, said that firms were passing on some costs but absorbing others.

He said: “You can see from the latest rash of financial results that things are not as they should be because of the hikes in steel and oil prices.”

In a separate announcement, the Construction Products Association claimed that the workload for energy, air-conditioning and boiler inspectors will increase with the introduction of the Energy Performance in Buildings directive, due in January.

The directive does not directly call for particular levels of building performance, but it is the driving force behind some of the Part L changes. The directive imposes additional duties on building owners, which the CPA

says will lead to increased demand for services professionals.

n In next week’s Datafile, Davis Langdon also shows that in the first seven months of the year prices increased 8% for cement, 6% for ready-mixed concrete, 5% for fibre cement products, 5.5% for rigid plastic pipes and fittings and 7% for asphalt products. Manufacturers blamed oil or energy prices for the increases.