UK building materials price inflation eased to 3.3 per cent in the year to December 2025, according to Department for Business and Trade data, a marked slowdown from the sharp increases seen during the pandemic and the energy shock that followed. But while the pace of inflation has fallen, prices themselves remain far above pre-pandemic levels.
By December 2025, construction materials prices were still 41.6 per cent higher than in January 2020, before Covid, despite periods of negative inflation during the second half of 2023 and through 2024.
That gap between slower inflation and still-elevated prices helps explain why the issue remains so visible for firms across the sector. Economists may focus on annual inflation rates, but for builders, manufacturers and merchants, the more pressing question is why prices have not dropped back to where they were before the pandemic.
The broad answer is that some of the cost increases that drove the original surge have become embedded in the system. Prices rose sharply when supply chains were disrupted and energy and commodity costs climbed. Wages then increased as workers sought to keep pace with higher living costs. Even as construction demand weakened, those higher costs did not fully unwind.
The first phase of the rise came in 2020 and 2021. Covid lockdowns hit construction activity, but the downturn resembled a shutdown rather than a conventional recession. When restrictions eased, activity recovered quickly, helped by a surge in housing new-build and repair, maintenance and improvement work as households sought more and better-quality space.
Supply chains, however, were slower to recover. Manufacturing lines had been interrupted, shipping containers and vessels were out of position, and global logistics were under strain. Those problems were compounded by the Ever Given container ship blocking the Suez Canal. Supply chain disruption peaked in October 2021, when annual materials price inflation reached 23.5 per cent.
As those pressures began to ease, a second shock followed. Russia’s invasion of Ukraine in 2022 triggered fresh spikes in energy and commodity prices, pushing annual materials inflation to 25.1 per cent. At the same time, strong demand and rising household costs, particularly for energy and food, fed through into higher wage pressures.
Since 2022, demand in construction has weakened, especially in housing new-build and repair, maintenance and improvement. But the sector has not seen a corresponding reversal in costs. Manufacturing and merchanting wages remain 40 per cent above pre-pandemic levels, while industrial energy prices are still 70.2 per cent higher than before Covid.
More recent policy changes are also adding to the pressure. Higher employers’ National Insurance Contributions, lower thresholds and increases in the National Living Wage in 2025 and 2026 have further lifted costs. The National Living Wage due in April 2026 will be 43 per cent higher than five years earlier.
Taken together, those factors help explain why construction materials prices have stopped rising as quickly, but have not returned to pre-pandemic levels.
