House Building: Lending and Construction Material Prices
Lending to House Builders
The value of loans outstanding to UK firms involved in the construction of domestic dwellings rose by £1.9bn from February to March 2020, an increase of nearly one-third (31%), as shown in Chart 7.1. The sudden increase likely reflected the need for credit to fund short-term liabilities owing to Covid-19 restrictions on construction activities and home moves, which had adversely affected firms' income. In addition, firms may have drawn down funds as a precaution, given the economic uncertainty.
However, since January 2021 the value of loans has steadily decreased. As at July 2021, the value of loans stood at £5.2bn, £933m (or 15.1%) lower than the value of loans at February 2020 (£6.2bn).
Source: Bank of England
Construction Material Prices
Data from BEIS on the cost of construction materials used in new house building (Chart 7.2) shows that construction material price inflation has accelerated since the early stages of the Covid-19 pandemic, when it was in negative territory, to stand at 19.8% in July 2021.
The annual increase in prices has been driven by certain products, namely imported plywood (+81.7%), fabricated structural steel (+64.7%) and imported sawn or planed wood (64.2%), with the only notable fall in prices seen for screws and other similar products (-14.1%).
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