**London**: UK construction sector leaders are alarmed by US tariffs on steel and aluminium, warning of cost increases and demand drops. Chief economist David Crosthwaite highlights potential supply chain disruptions, while UK trade secretary Jonathan Reynolds pledges government support for the steel industry amid rising material costs.
Construction sector leaders in the UK have expressed significant concerns regarding recently imposed US tariffs on steel and aluminium, warning that these measures could lead to increased prices and reduced demand for steel within the construction industry. This warning was articulated during a presentation on Balfour Beatty’s annual results on 12 March, where chief executive Leo Quinn spoke on the implications of the tariffs introduced by US President Donald Trump. These tariffs, set at 25 per cent globally on steel and aluminium products, have raised alarms among professionals in the metal manufacturing and construction sectors.
Quinn highlighted the need for main contractors to manage the potential fallout from these tariffs carefully, given their impact on the supply chain. He noted, “When [the US] puts steel tariffs up by 50 per cent on Canada, we need to be careful because we carry a big backlog and it all goes into the subcontract base,” emphasising that the risks mainly rest with subcontractors, which in turn affect final pricing for customers.
The implications of the tariffs extend beyond immediate pricing concerns; David Crosthwaite, chief economist at the Building Cost Information Service (BCIS), remarked that the primary worry is the likelihood of supply chain disruptions and the accompanying volatility in steel prices. He added, “For industries like construction, where investor confidence is key, this kind of uncertainty can be particularly damaging.” Crosthwaite underscored the long-term effects that these tariffs may have, especially if domestic steel producers find it challenging to compete.
Gareth Stace, director of steel industry trade body UK Steel, described the tariffs as “hugely disappointing,” timing them unfavourably with existing pressures such as high energy costs and subdued demand for steel. He urged the UK government to not only pursue negotiations for exemptions with the US but also to take decisive actions to strengthen trade defences.
Jonathan Reynolds, the UK’s business and trade secretary, labelled the imposition of tariffs as “disappointing,” but reaffirmed the UK government’s commitment to supporting the steel industry. He noted that the government is engaged in rapid negotiations for a broader economic agreement with the US aimed at mitigating tariffs and benefiting UK businesses. Reynolds also referenced the recent £2.5bn investment from the National Wealth Fund as part of the government’s strategy to support the steel industry.
The construction sector has been grappling with rising costs for building materials since the onset of the COVID-19 pandemic, which caused significant production slowdowns across various industries. Further inflation has exacerbated material costs, with the BCIS forecasting a potential 15 per cent increase in build costs over the next five years, heavily influenced by labour costs.
As the situation develops, uncertainties around tariffs continue to dominate discussions in the US construction industry. Ongoing deliberations regarding the proposed 25% import tariff on construction materials from countries including Canada, Mexico, and China are causing economists to assess the financial ramifications on overall construction costs in the US.
In this context, construction contractors are advised to prepare for potential increases in project costs due to tariffs, particularly for those involved in fixed-price contracts. These contractual arrangements could lead to considerable financial strain if the added material costs are not addressed pre-emptively. The Nat Law Review suggests that contractors should be prepared to adapt their contracts to include clauses addressing these rising costs, highlighting the need for adaptability in economic conditions influenced by tariffs, environmental factors, and other unexpected disruptions.
The construction industry’s response to these evolving tariffs will require vigilant monitoring and proactive management to navigate the implications effectively.
Source: Noah Wire Services
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