The going rate
27 October 2021
Two blog posts earlier this month asked whether the average hire industry professional’s glass is half full or half empty following recent economic jolts. I’ve since had a number of interesting conversations about equipment costs and hire rates.
The MD of one manufacturer said they feel as if they are playing whack-a-mole as a new challenge seems to appear as soon as one goes away.
“We are facing supply chain disruptions and delays, price rises of 150% and more on some components and in certain cases our engineers are trying to find and test alternatives. The team is flat out.
“At the same time, demand is rising and we are recruiting more people – but will we be able to provide them with the components that are needed for manufacture? And energy prices are rising. It’s like walking in treacle that’s sticky and getting stickier.”
And this will inevitably put more pressure on product prices.
Indeed, reflecting the general economic backdrop, the boss of the consumer goods giant Unilever warned recently that shoppers could expect rising prices across almost every household product.
Its chief executive Alan Jope said the business was facing a “once in a two decade inflationary scenario so we have stepped up pricing.” He added that Unilever was facing cost pressures in every area of business including resin plastics, paper, transport, labour, energy and raw ingredients and all for different reasons. He said that he expects the rises to continue well into the first half of next year.
So against such an inflationary background, how are hirers reacting?
One hirer said that the lack of equipment is placing the focus on utilisation. “Utilisation is already high – it’s at record levels for some items – and we are trying to get it even higher. Our workshops are flat out getting off-hired equipment back out on hire to waiting customers as fast as possible.
“However, a positive is that in this supply chain environment there should be less pressure from customers on hire rates and an appreciation of availability. That’s what our sales reps are emphasising.”
Another hirer I spoke to plans to increase hire rates soon. “We have no choice. Inflation is rising, wages increasing, phones and broadband are more expensive and equipment costs are going up. All that has to be paid somehow.
“We’ve always tried not to go down the route of discounting, stressing the quality of our service. And if utilisation is high, why should a customer expect a cheap price?
“Obviously there are customers who spend a significant amount with you regularly and you want to be flexible but you have to draw the line somewhere. And quite honestly, we take doing business personally.
“We typically raise our rates quietly. Like most hirers probably now, we no longer have a printed catalogue and everything is updated online. We’re not talking about big increases, but a little more on fast-moving items like scaffold boards and power tools soon makes a difference over a number of hires.
“We’ve held off for as long as we can but virtually all our suppliers have put their prices up and it has a knock-on effect. If we are to continue giving great service and reliable equipment, rates have to go up in the current climate.”
All three of the people I spoke to were positive about the future. They pointed out that demand is high and the Government’s stated commitment to infrastructure development should maintain that.
I also spoke to the MD of another tool hirer who recently informed his customers of an average single-digit rate rise from November.
Most have accepted it without question, he said, but some have kicked back – including one of the company’s top clients who has asked to discuss it, suggesting he might put all current contracts out to to tender again in reaction.
“I spoke to my client and after a nice catch-up I asked him if there was a percentage increase he would be willing to give us, without it triggering a need on his part to re-tender our work,” the hirer told me.
“I thought this would be a better approach than discussing our intended figure and then asking for his agreement to a smaller number. He responded well and went away to think about it.
“He subsequently offered us a 2% increase, less than we originally suggested but I’m pleased that my approach got him to agree to something! Every little helps…”
Indeed. And as the saying goes, half a loaf is better than none.
Incidentally, you can read the two earlier posts here and here.
Photo: Steve Watts/Pixabay
