Contractors are increasingly finding that they can push out tender prices – but any increase in prices is being offset by rises in materials and labour costs, according to the latest trade survey on the first quarter of 2014 from the Construction Products Association.
The CPA report brings together the results of surveys by the Civil Engineering Contractors Association, the CPA itself, the Federation of Master Builders, National Federation of Builders, National Specialist Contractors Council and the UK Contractors Group.
In Q1, it found that 47% of building contractors – ie members of the UKCG and NFB – reported that tender prices rose in Q1, a considerable jump from the 2% reported in Q4.
But the number of building contractors reporting a rise in profits margins, on balance, was offset by the number of building contractors reporting a fall in profit margins.
That was because 89% of firms reported rises in material costs in Q1, higher than the 65% of firms reporting material cost rises in Q4. On labour costs, 50% of firms reported price rises, higher than the 34% of firms reporting labour cost rises in Q1.
Among building contractors, 77% reported that costs rose in 2014 Q1 compared with 63% in 2013. This is the third consecutive quarter that showing an increase in reported cost inflation.
Among civil engineering contractors, an even higher percentage – 90% – reported an increase in costs. 15% said that prices had increased by more than 5% since Q4 2013, while 75% said the increase was up to 5%.
The CPA’s economics director Noble Francis, said: “Tender prices rose in Q1 but any boost from this is likely to occur when the resulting work hits the ground later this year. Currently, the key concerns are rising costs and skills availability in specific sectors such as private new housing.
“Overall, the industry reported that there weren’t serious problems recruiting construction trades. However, 61% of building contractors reported that it was difficult to obtain bricklayers during Q1 compared with 41% in Q4 and only 10% one year ago. A further 28% reported that they had difficulty recruiting carpenters in Q1, slightly lower than the 32% in Q4 but contrasting sharply with only 3% experiencing difficulties recruiting carpenters just one year ago.”
Paul Senior, national chair of the National Federation of Builders, added: “Rising workloads and increases in future orders are good news, but behind those figures are areas of concern. Higher labour costs and a lack of available skills are a ticking time bomb that needs to be defused urgently otherwise, for many SMEs, the premiums attached to the cost of simply building will become unsustainable.”
Meanwhile, the National Specialist Contractors Council, in its own state of trade survey, has reported that the number of members reporting an increase in enquiries rose to 59%, the highest figure for over 15 years. The increased level of enquiries also translated into more orders, with 50% of respondents reporting an increase since the last quarter, which is 23% up on this time last year.
As a result, specialist contractors are feeling more positive about the future than they have for some time: 54% anticipate their workload increasing over the next quarter and 71% expect to see an increase over the next year, the highest result ever recorded by the survey.
But late payment is still a major issue with just 14% of respondents reporting that they were paid within 30 days and 63% waiting between 30 and 60 days for their money. Most worryingly, 23% indicated it took between 60 and 90 days to receive payment, well above the five-year average for the survey.
