Will the soaring costs of metal slow down cladding remediation?

The 10-storey building had Grenfell-style aluminium composite material (ACM) cladding, high-pressure laminate cladding and missing fire barriers, among other issues. The ACM cladding was removed in 2020 after money was secured from the government’s initial ACM fund.

However, since then, leaseholders have struggled to reach an agreement with the government over funding for replacement cladding, with a deal having being struck only in January.

All the while, the leaseholders at Northpoint have seen remediation costs for the building increase. A letter from their contractor in January said overall costs were increasing by 14%. Part of this was down to a 15% increase in cladding costs and a 22% rise in scaffolding costs.

“There is a risk that the contractor decides to walk away from the project. This would mean a need to re-tender the works, which could have further cost and programme implications”

The letter said: “The biggest issue we are experiencing is tying down our supply chain from a cost perspective as they in turn are not getting any cost certainty from their suppliers because of unpredictable price changes.” And this was before the Ukraine war.

The leaseholders have also had to cope with water ingress at the building, as a result of the cladding not being there, leading to damp and mould. “We had to get abseilers in to carry out temporary waterproofing,” Ms Saha says.

She says the other issue is that quotes from contractors are for a limited time period – often only for seven days.

Headache for BSF applicants

Elsewhere in the country, leaseholders are mired in similar problems. At a building in North West England, leaseholders have been warned that delays to fix their building are likely to lead to higher prices.

“The longer this situation drags on, the more likely that we will be affected by cost increases due to inflation,” leaseholders were told in an email from their management company and seen by Inside Housing.

It added: “There is a risk that the contractor decides to walk away from the project. This would mean a need to re-tender the works, which could have further cost and programme implications.”

Scott Mason, founder of Clad To Help, which advises on cladding remediation projects, is aware of the problems.

“Contractors are inundated with demand for remedial work and wider supply chain issues are affecting material prices and lead times, creating a headache for Building Safety Fund (BSF) applicants who find themselves chasing their tails,” he says.

He echoes Ms Saha’s experience around contractor quotes. “In the current climate, contractors can’t hold their price as long as they would have a few years ago,” he says.

“I had a situation where I just wanted a small amount of metal cladding for training purposes, which I would normally have got within a week. But it got to the stage where there was an eight-week wait”

Further difficulties are found in this matrix. Contract negotiations between applicants and a contractor often cannot be finalised until a grant is formally offered, Mr Mason explains.

“But this offer can be months after the fund’s stage-two submission due to prolonged governance,” he says. “It is only at the conclusion of contract negotiations that the price effectively becomes locked in between the applicant and the contractor, whereas the amount applied for and offered by the BSF is based on the contractor’s tender price pieced together months before.”

Mr Mason says that with his own situation, they included a contingency allowance of 3.5% to cover cost rises in the four months before submitting an application to the BSF. However, he says, the contract price increased more than 6% by the time the work needed doing. “We had no choice but to eat into a separate general contingency sum that was intended for other unknown risks,” he says.

Tying contractors down to do the work is also a recurring theme. Giles Grover, from the End Our Cladding Scandal campaign, says: “I think there’s some contractors that can almost cherry pick what projects they work on, because there’s that many out there.”

Of late, the issue of rising materials costs has also very much loomed on the horizon. It was a problem prior to Russia’s invasion of Ukraine, but has since been ratcheted up by the conflict.

Steel prices in particular have surged amid supply being disrupted across Europe, with Russia being the world’s fifth-largest steel producer. Meanwhile, in March, British Steel hiked its prices by 25% – reportedly its highest-ever one-off increase.

“Just because you see a double-digit increase in materials and product costs, it doesn’t mean you see total building costs rise by double digits”

Noble Francis, economics director at the Construction Products Association, says that steel and aluminium have been affected by a double whammy of a spike in commodity prices and energy, with both materials being energy-intensive products.

He believes there could be “significant impacts” on cladding remediation projects into next year, although he suggests that the spikes could even out within the next six months if there are no further one-off shocks.

He is keen to point out, however, that two-thirds of contractor costs are usually labour costs. “Just because you see a double-digit increase in materials and product costs, it doesn’t mean you see total building costs rise by double digits,” he explains. “Labour costs are still at single-digit inflation.”

Carlton Jones, director of the Metal Cladding and Roofing Manufacturers Association, says he has also noted the sharp rise in steel and aluminium costs since Brexit and the pandemic.

He has seen the price of some steel double from £800 a tonne to £1,600 a tonne. “I know a supplier of coated steel who increased their prices four times over the space of eight or nine months,” he says.

‘Brexit is not sorted’

Supply timescales have also been an issue. “I had a situation where I just wanted a small amount of metal cladding for training purposes, which I would normally have got within a week,” says Mr Jones.
“But it got to the stage where there was an eight-week wait.”

It also depends where products are sourced from. “Steel supply could be from the UK, Europe or the Far East. And people might feel that Brexit is sorted, but as far as the industry is concerned, Brexit is not sorted. The trade agreements and the customs and the CE marking – all of that is causing an issue.”

Jonathan Evans, chief executive and chair of cladding supplier Ash & Lacy, notes the significant impact of the war in Ukraine.

“One of the world’s biggest manufacturers of aluminium is (Moscow-headquartered) Rusal,” he says. “But obviously, due to sanctions, that means around 12% of the world’s global aluminium supply is being affected. That’s not helping the situation.”