Work hard, lose money
25 August 2021
Following on from Monday’s blog post about driver recruitment difficulties, a hirer told me about a rather sobering conversation he had with a contractor highlighting another ongoing challenge: material shortages and rising costs.
“He’s MD of a company that is a very good client of ours. He told me he’s had to walk away from building contracts worth £4 million because of rising material prices, after realising he would have ended up losing money on every job.
“He had originally costed each job on a fixed price basis and with the cost of materials and equipment spiralling upwards he would have seen any profit disappear,” said the hirer. “Inflation is rising generally with interest rates at rock bottom and lead times for some basic construction machinery in some cases is 26 weeks.
“As he put it, he could stay in bed all day and lose money without having to go to work to do so.”
So less business for the contractor – and, in turn, for the hirer.
If more contractors come to the same conclusion, building activity overall could start to slow: welcome, perhaps, in the short term when hirers and suppliers have been struggling to keep pace, but hardly desirable over a longer period.
Hopefully prices and availability will return to something like normal before too long. The Bank of England certainly keeps insisting that the sharp rise in inflation over recent months is only temporary.
Picture: Jayne Simmons/Pixabay