The energy crisis and its effect on construction

The current energy crisis is yet another blow to the electrical sector and the wider construction industry.

Even though wholesale gas prices have been rising steadily since the start of the year – an increase of 250 per cent – they have rocketed in recent months, rising 70 per cent since August.

Following on the heels of Covid-19 and Brexit, which has led to shortages of materials, supply chain issues and a lack of skilled labour within the construction industry, the energy crisis looks set to further stall any momentum that was gained in the sector during the early half of 2021.

Of course, it’s not just the construction and electrical industries that have been affected by this perfect storm of Covid-19, Brexit and now the energy crisis. From meat producers to steel makers, retailers to hauliers, not to mention the end consumers, everyone is being impacted in some way. However, due to the nature of our work, we’ll be taking a closer look at what has caused the UK’s energy crisis and how it will affect the electrical industry and the wider construction sector.

Why is there an energy crisis?

Gas is in demand worldwide and it’s affecting the UK’s wholesale energy markets. Unsurprisingly, there isn’t just one factor at play here – there are many things that have contributed to this high demand. This includes a particularly cold winter last year across the globe and a rise in post-lockdown demand which has led to gas reserves running low.

This is particularly worrying for the UK as around half of all our electricity comes from gas-fired power plants, and we now have a greater dependence on gas from abroad after we mothballed our coal fired power stations in a bid to meet low carbon targets.

The weather hasn’t helped in another respect either: following a less than breezy summer, we haven’t even got much back-up from wind power sources.

What does it mean for the construction industry?

All of this has led to a spike in prices among energy-intensive sectors such as factories and manufacturers of steel and glass. And, with the construction industry reliant on these kinds of products, this looks set to become a big issue and another factor in the decline in activity.

For us as electrical contractors, the industries that we typically work with are also being adversely affected by the energy crisis. With our key clients working across the retail, hospitality, tourism, leisure and industrial sectors, we expect current and planned projects to be impacted.

It’s going to be tough, as pressures mount on all sides from the impact of Brexit, Covid-19 and now the energy crisis. Costs continue to rise for raw materials, labour, energy and fuel, and margins are being squeezed more and more. Projects are being delayed and payments are not forthcoming for work already undertaken. At the same time, sub-contractor charges have risen sharply as more workers have been brought in by businesses to help manage larger workloads and ease the burden on their resources.

As we experience ever more unprecedented challenges, this rollercoaster ride that we’ve been on for the past two years looks set to continue for some time yet.