Under pressure?

31 May 2021

How are your costs shaping up? I bet they’re not decreasing. In fact, they seem to be rising for virtually everyone and a good example is in construction. 

While the media were able to highlight stories about decent summer weather - at last - over the bank holiday weekend, a gloomier development also made headlines. 

The Times reported that builder’s merchant Travis Perkins (pictured) is to raise the price of its bagged cement by 15%, chipboard by 10% and paint by 5% from 1 June. 

As this blog has pointed out previously, demand is surging as lockdown eases, and supply chain issues have disrupted deliveries, including rising global transport costs. 

Also, a warm winter in Scandinavia affecting timber production, and a cold season in Texas hampering chemicals and plastics processing, haven’t helped either. 

The BBC quoted the Federation of Master Builders saying that small, local builders are being hit hard by material price rises of as much as 50%. It said some firms could delay projects and others might even close. 

Indeed, the Office of National Statistics has forecast a 7-8% rise in material prices this year, with timber expected to more than double. 

It’s a double whammy. On one hand, rising prices and delays could put hirers’ trade customers under pressure, perhaps affecting their cash flow and their ability to pay bills on time. And on the other hand, hirers are themselves experiencing price increases on equipment and parts, as well as shortages - another topic covered on the blog previously here. 

With the Bank of England forecasting inflation to reach 2.5% this year hirers, like other businesses, should  look at their own costs and see how well their rental rates and revenues will cover them. 

The weekend media also had stories of recently re-opened restaurants increasing meal prices by 10% or so to reflect their own rising overheads. So there’s surely an acceptance that costs are going only one way – you only need to look at fuel prices since the lockdown easing. 

If builders’ merchants and restaurants can put up prices justifiably, then maybe hirers should also look at what they need to add on to their own menus.