I spend a lot of time researching the cost of home improvements. Extensions, loft conversions, even simple jobs like building internal walls. And in recent years one thing has stood out.
Costs have gone up. A lot.
We all know this. Costs go up all the time. But actually the scale of the increase recently is particularly extreme. And it’s had two knock-on effects:
- People are shocked when they come to get quotes. People’s perception of certain home improvements (e.g. a double-storey extension) can be £50k-£100k lower than current prices.
- It may have rendered some home improvements unviable. For instance, loft conversions in London used to be a good bet. The cost of work was outweighed by the value it added to your home. Now? Not so sure.
So what’s happened?
How much have building costs increased in the UK?
In the last 5 years, UK construction costs have gone up by 25.9%. This contrasts with a 14.7% increase over the previous 5 years. In other words, the rate of construction cost inflation has doubled. And of course in some trades it will be much more.
This data, by the way, comes from the Office for National Statistics. Most of the increase occurred in 2021 and 2022, as you can see:
| Calendar Year | Increase in Construction Costs in the UK |
| 2020 | 2.0% |
| 2021 | 7.7% |
| 2022 | 10.3% |
| 2023 | 1.6% |
| 2024 (so far) | 2.7% |
The good news is that the inflation certainly looks to be slowing down. Unfortunately these cost increases are not likely to be reversed. That means if you’ve had your eye on an extension, it might be a fair bit more than you budgeted.
Why have building costs increased in the UK?
You already know the answer to this: Covid, and Brexit. Ultimately those are the root causes for building costs increasing. But the more specific reasons are:
- Fewer construction workers since 2020
- Increased material costs
Fewer construction workers
The UK has struggled to keep people in work over the past 5 years, but this problem is particularly acute in construction.
From Sept 2024 to Jan 2020, there are 1.2% more people in general employment (despite our population growing by 1.7%). That’s across all industries, men and women.
For construction, the labour force has reduced by 10.5%. It’s a severe drop in workers, and is particularly concentrated in men. You can see the breakdown here:
| Group | Jan 2020 Workers | Sep 2024 Workers | Change |
| Men | 2,011,000 | 1,757,000 | -12.6% |
| Women | 291,000 | 303,000 | +4.1% |
| Total | 2,302,000 | 2,060,000 | -10.5% |
The reason? Older construction workers decided to retire after Covid, and many younger EU workers left, or moved to other countries such as Germany.
This lack of workers has had a predictable effect on costs: wages have been pushed up.
Increased Material Costs
Covid brought huge disruption to supply chains, and we’re only just getting over them. Brexit has brought its own obstacles in terms of trade, and the energy price spike from the Ukraine war has had an impact on manufacturing and processing too.
The result? Building material costs in the UK have gone up 38.4% since January 2020.
This data comes from the Department of Business and Trade. Unsurprisingly, almost all of this increase occurred in 2021 and 2022. It’s flattened out since, but the cost rises will still be there in any project you start.
| Calendar Year | Building Material cost inflation |
| 2020 | 0.2% |
| 2021 | 15.2% |
| 2022 | 19.1% |
| 2023 | 0.9% |
All materials have gone up in price, but some more than others. Of all the categories listed by the Department for Business and Trade, the biggest increase is concrete reinforcing bars, at a whopping 59.7%. The lowest increase was in timber doors and windows (+15.3%) with taps getting an honourable mention at +18%.
| Category | Construction Material | Cost inflation 2020 to 2023 |
| Aggregates | Bituminous Mixtures based on Natural and Artificial Stone | 34.1% |
| Aggregates | Gravel, Sand, Clays and Kaolin – incl Aggregate Levy | 31.9% |
| Cement and concrete | Cement | 31.2% |
| Cement and concrete | Concrete reinforcing bars (steel) | 59.7% |
| Cement and concrete | Pre-cast concrete products | 52.6% |
| Cement and concrete | Precast concrete: blocks, bricks, tiles and flagstones | 39.4% |
| Cement and concrete | Ready-mixed concrete | 45.5% |
| Metal Products | Taps and valves for sanitaryware | 23.3% |
| Metal products | Central heating boilers | 20.9% |
| Metal products | Fabricated structural steel | 52.7% |
| Metal products | Metal doors and windows | 39.7% |
| Metal products | Metal sanitaryware | 20.0% |
| Metal products | Other builders’ ironmongery | 18.0% |
| Metal products | Screws etc | 28.4% |
| Other building materials | Electric water heaters | 18.3% |
| Other building materials | Insulating materials (thermal or acoustic) | 53.6% |
| Other building materials | Kitchen furniture | 30.0% |
| Other building materials | Paint (aqueous) | 20.4% |
| Other building materials | Paint (non-aqueous) | 29.9% |
| Plastic products | Pipes and fittings (flexible) | 29.8% |
| Plastic products | Pipes and fittings (rigid) | 24.9% |
| Plastic products | Plastic doors and windows | 44.8% |
| Plastic products | Plastic sanitaryware | 25.4% |
| Timber and joinery | Builders woodwork | 34.1% |
| Timber and joinery | Builders woodwork: doors and windows | 15.3% |
| Timber and joinery | Imported plywood | 33.6% |
| Timber and joinery | Imported sawn or planed wood | 20.5% |
What should you do about increased building costs?
It’s unlikely costs will go down by much in the near future. We’d either need much cheaper energy, or many more workers. Demand for home improvement may slow down as interest rates remain high – this could mean builders accept lower rates. Then again, we’re supposed to be building 1.5 million more homes, so I doubt builders will be struggling for work.
In other words, waiting might not help.
The reality is that costs have gone up by over 25% in the past 5 years, and house prices in many regions have not. In London, for example, house prices have risen by 14.5% over the same period. That means that your cost of building each square metre is getting closer to what each square metre is worth.
Really the new approach when building or extending your home needs to be:
- What is the real cost right now, including possible overspend, and would I actually be getting bang for buck? Especially considering the disruption it brings.
- Accept that some home improvements won’t add the value they used to, but you’re doing it to improve your quality of life. This has been true of kitchens for a long time – they rarely make their money back in house value, but it’s nice to have a new hob, isn’t it?
