Costs increase with tender prices static – feeling the squeeze?
With many manufacturers reporting further rises in raw material prices in the third quarter of 2017 and only a small proportion of Main Contractors increasing tender prices to compensate, many are anticipating a squeeze on construction margins in the coming months.
The Construction Products Association’s (CPA) construction trade survey for Q3 targeted Main Contractors, builders and civil engineering contractors and found that the construction supply chain was reporting increases in sales and output in the third quarter of 2017, driven by increased demand in private housing and infrastructure, albeit with commercial work falling back.
The survey’s key findings included:
- 92% of Main Contractors reporting raw materials costs rose in Q3.
- 40% of Main Contractors reporting that output rose in the Q3
- Main Contractors reporting the highest volume of orders in private housing and Repair and Maintenance works
Commenting on the results of the survey, Rebecca Larkin, senior economist at the CPA, said:
“In common with the wider economy, the construction industry continues to experience cost inflation, particularly for raw materials. A clear consequence of the supply chain trying to absorb these higher costs is the fall in contractors’ profit margins since the start of the year.”
Naturally these are worrying findings for the industry and perhaps a sign of harder times to come. With these concerns in focus, Main Contractors and Developers are being encouraged to re-think their buying trends in order to deliver greater efficiencies.
As part of its Construction 2025 report, the UK Government clearly identified, that Construction Buyers could make “the biggest efficiency gains from early engagement of its supply chain” and therefore, Main Contractors and Developers are encouraged to focus on supply chain management to reduce costs and increase profits.
New technologies such as the procurement platform, C-Link, provide opportunities for Construction Buyers to save time and money in procurement. The free of charge service allows Project Managers and Quantity Surveyors to build their procurement schedules online and to search the entire construction supply chain with one click.
C-Link is allowing Main Contractors and Developers to better understand the Specialist market and in turn, tender to a wider pool of Specialists in order to maximise time and cost savings.
Find out more at www.c-link.com.
About Paul Heming
Paul was a Quantity Surveyor who gained 10 years experience of managing £200 million worth of flagship UK projects, including 20 Fenchurch Street and Battersea Power Station. In 2015, Paul founded C-Link with the intention of sharing his expertise of managing major projects with the SME market.
Video Episode 50
What do property investors
ask property developers when they are doing their due diligence?
Podcast Episode 57
Return of the swamp
The Essential SME Property Development Guide