Interpreting the signs
6 April 2022
Astrologers talk of planetary alignments influencing events and human behaviour when two or more planets are arranged roughly in a straight line.
I’m not vouching for the accuracy of such forecasting methods, but perhaps a similar situation – with much more meaningful significance – is occurring in the hire universe.
Essentially, a number of factors that drive hire demand are coinciding and causing a self-feeding upward spiral.
This was highlighted last month by Brendan Horgan, CEO of Sunbelt Rentals’ parent Ashtead Group, during a presentation for equity analysts after the company’s Q3 results.
He highlighted three factors that are creating a structural shift from owning equipment to hiring it. These are: supply chain difficulties, inflationary pressures and shortages of experienced labour.
“Any one of these dynamics is something that we have all confronted at one point or another over a number of economic cycles. However, when taken together, as is the reality today, one can draw generic conclusions as to their impact on the macro business environment.”
As the blog has reported regularly, hirers are already experiencing high or record levels of demand, and equipment supply difficulties will further encourage owner-operators to hire the machines they need.
Similarly, increases in product prices, goods, fuel and wages will make ownership less attractive; and a reduced pool of experienced labour would likely lead to contractors forming closer partnerships with capable hirers in order to seek more efficient working methods and avoid project delays.
Brendan Horgan believed that these factors could remain for at least the next four to six quarters. He also suggest that this trading environment favoured organisations with the resources to forward order equipment on a large scale and to train and retain staff.
It will be fascinating to see how these trends play out, not least because there are are other forces at work such as the post-pandemic recovery and the global impact of the Ukraine conflict.
