Construction, on alert: 40% of companies have canceled or halted works due to the rising cost of materials

“There is no indication that the rising cost of raw materials is stopping and concern in the sector is increasing.” This is stated by the president of the National Construction Confederation (CNC), Pedro Fernández Alén, who denounces that the current regulation does not allow the sector to have an agile reaction capacity in the face of this situation.

According to the data managed by the employer, the rise in the price of materials has increased the total cost of the works by 22.2% on average and this has led to four out of ten companies having been forced to cancel or paralyze their works.

What’s more, 75.6% of companies operating in the sector have experienced unusual shortages or delays in the last three months in the delivery of essential materials such as wood, steel or aluminum.

The rise in electricity and oil also plays a relevant role in increasing the cost of works, as explained by Fernández, who assures the sector is “very sensitive to increased energy, since factories such as tile or brick factories have a huge consumption that logically affects the final cost. Likewise, the rise in oil has a significant impact on the sector, although we are still not able to quantify what exact percentage of the rise in costs comes from these two routes. ”

Faced with this panorama and without “a horizon that shows a relaxation in the price of raw materials”, the CNC urges the Government to take measures to guarantee the viability of the projects underway and thus avoid a wave of cancellations or stoppages.

This situation of tension is also occurring at a “crucial time for the sector”, since with the implementation of the rehabilitation aid programs, the Recovery Plan, the employer considers it crucial to have a budget that does not go to be increased during the course of the administrative procedures for obtaining the funds.

“The rise in raw materials is one of the main threats to the introduction of European funds. There is a danger of indigestion, since the delay in its management and execution, together with this increase in cost and the lack of labor, will cause bottlenecks that could end up slowing down the pace of recovery “, warns the president of the CNC.

Depending on the sector, the viability of many of these projects could be at stake, since the average cost increase of 22.2% in the works exceeds in many cases the amount that the company must assume if it decides to abandon the project. In this sense, it has specified that the penalties can be 0.02% of the contract or between 1,000 and 2,000 euros per calendar day.

Changes in regulation

Fernández believes that Spain should look to other European countries such as “Italy, France and Germany, in which mechanisms have already been put in place to solve this problem.”

In this sense, the employer considers that the Government should modify the regulation to establish “an automatic rebalancing system that allows it to face this extra cost and, therefore, take into account price changes after the submission of offers, both up and down, seeking to provide stability to the contract “.

However, CNC has worked on various models that facilitate claims by construction companies against the Administration or the project promoter. In this way, any company affected by the unusual increase in the price of raw materials may request the contracting party to extend the term, modify the contract or compensation for breaking the contractual economic balance.