The recent upturn in the housing market has been greeted as a sign the UK is finally on course for economic recovery, but for parts of the grocery supply chain it has had an unexpected negative effect - it has sent the price of wooden pallets soaring.

Timcon, the trade body for the timber pallet and wooden packaging sector, is warning that timber prices have shot up and that wood supply for pallet makers is perilously tight.

General secretary Stuart Hex said the recovery in the UK housing market - supported by new government financial incentives for first-time buyers - were driving the increases.

The price of UK-made pallet and packaging timber had gone up by nearly 10% over the second and third quarters of 2013, Hex said, citing industry index Poyry, which tracks pallet timber prices. Price increases had accelerated during the third quarter and would have to be passed on soon, he warned.

“Competition and weak demand in recent years have kept prices of timber pallets and packaging at a low, even unsustainable level, for a significant period of time,” Hex said. “We are now facing increasing timber prices, which as an industry we cannot absorb.”

As UK sawmills were getting more and more business from the construction sector again, some were also becoming reluctant to cut timber into non-standard sizes, including some sizes used in grocery, he added. About 80% to 90% of the timber used by British pallet makers is from the UK, making the sector especially vulnerable to price rises in UK timber.

But even those who source from abroad cannot escape rising prices. Improvements in the US housing market and growing demand for timber in China and North Africa meant Canadian, Scandinavian and Baltic timber are “unlikely to alleviate the shortages faced by the UK industry”, according to Timcon.

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