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More than half of small building firms say that rising material prices are squeezing their margins and the same percentage have had to pass these price increases onto consumers, according to the latest research by the Federation of Master Builders (FMB).
Small and medium-sized (SME) building firms were asked which materials are in shortest supply and have the longest wait times. The average results were as follows (in order of longest to shortest wait times):
- Bricks were in shortest supply with the longest reported wait time being more than one year
- Roof tiles were second with the longest reported wait time being up to six months
- Insulation was third with the longest reported wait time being up to four months
- Slate was fourth with the longest reported wait time being up to six months
- Windows were fifth with the longest reported wait time being more than one year
- Blocks were sixth with the longest reported wait time being up to four months
- Porcelain products were seventh with the longest reported wait time being more than one year
- Plasterboard was eighth with the longest reported wait time being up to two months
- Timber was ninth with the longest reported wait time being up to two months
- Boilers were tenth, with the longest reported wait time being more than one year
SME building firms were also asked by what percentage different materials have increased over the past 12 months. On average, the following rises were reported:
- Insulation increased by 16%
- Bricks increased by 9%
- Timber increased by 8%
- Roof tiles increased by 8%
- Slate increased by 8%
- Windows increased by 7%
- Blocks increased by 7%
- Plasterboard increased by 7%
- Boilers increased by 7%
- Porcelain products increased by 6%
The impact of these material price increases includes:
- More than half of construction SMEs (56%) have had their margins squeezed, this has gone up from one third (32%) reporting this in July 2017
- Half of firms (49%) have been forced to pass material price increases onto their clients, making building projects more expensive for consumers, this has gone up from less than one quarter (22%) reporting this in July 2017
- A third of firms (30%) have recommended that clients use alternative materials or products to those originally specified, this has gone up from one in ten reporting this in July 2017
- Nearly one fifth (17%) of builders report making losses on their building projects due to material price increases, this has gone up from one in ten reporting this in July 2017
Brian Berry, Chief Executive of the FMB, said “Material prices have rocketed over the past year. The reason for this could include the impact of the depreciation of sterling following the EU referendum still feeding through. High demand due to buoyant international markets could also be contributing to price increases. What’s particularly worrying is that when prices have increased mid-project, almost one fifth of builders have absorbed the increase and therefore made a loss. Also, if material price increases weren’t enough of a headache for building firms, they are also experiencing material shortages with wait times ticking up across a range of materials and products. Worst case scenarios include firms waiting for more than one year for a new order of bricks.”
“The rise in material prices is not just a problem for the country’s construction firms – it is also a problem for home owners. Half of firms have been forced to pass these price increases onto their clients, meaning building projects are becoming more and more expensive. This problem has worsened recently with more than twice as many firms passing material prices on to their clients now compared with nine months ago. What’s more, home owners should be prepared to have to use alternative materials or products to their first choice. One third of firms have recommended that their clients should use alternative materials or products to those originally specified. Now more than ever, it’s important that builders and their clients keep the lines of communication open in order to stay within time and within budget. Specified products or materials may need to be swapped for alternatives or clients will need to accept the additional cost.”
“We are calling on builders merchants to give their customers as much advance warning of forthcoming material prices increases or wait times as possible so that firms can warn their customers and plan ahead. We are also advising builders to price jobs and draft contracts with these material price rises in mind. The FMB’s latest State of Trade Survey shows that almost ninety per cent of building firms are expecting further rises over the next sixth months. This makes quoting for jobs difficult but if builders flag the issue to their client from the outset, and include a note in the contract that prices may be subject to increases, they shouldn’t be left short. What we don’t want is for the number of building firms making losses on projects to increase as this could result in firms going to the wall. A large number of collapsing construction companies will have a terrible knock-on effect in the wider economy.”
Home owners should book in their builder at least four months before their project begins or risk working with a cowboy, research from the Federation of Master Builders (FMB) has revealed.
The research also shows that an alarming number of consumers don’t ask their builders for essentials such as a contract or references when embarking upon a major piece of building work.
Key statistics from the research show:
- More than 40% of builders need at least four months’ notice from consumers who want to hire their firm
- 90% of builders say that the majority of home owners do not ask for a written contract
- 80% of builders report that most consumers do not ask for an agreed payment schedule
- Fewer than 10% of builders say that clients normally request to see vital insurance policies such as public liability or employer’s liability insurance
Brian Berry, Chief Executive of the FMB, said “If a builder is free to start work tomorrow, alarm bells should ring. Demand for building work is incredibly high at the moment and it should be no surprise that almost one in two builders need to be contacted at least four months in advance of when a client is looking to start a home improvement project. The workloads of builders have been rising steadily over the past two years and there’s no shortage of work. That’s why we’re urging home owners who are keen to crack on with their build or renovation projects to start getting in touch with prospective builders as soon as possible. Otherwise, they risk disappointment delaying their projects or worse still, working with a dodgy builder. So many building horror stories start with a client approaching a builder who’s free to start work sooner than the more professional builder who is really busy.
“There are also indications that home owners are leaving themselves vulnerable to problems in terms of how they approach their building work. The vast majority of builders say that most clients fail to ask for references and even fewer ask for a written contract on their work. There is a similar trend when it comes to asking for critical things like an agreed payment schedule and key warranties on work, as well as checking whether the builder has any external accreditation or recognition from professional trade association like the FMB. These protections really are essential to helping clients weed out the cowboys and mitigate against any issues that could crop up during the build. A quality builder will insist on these things and if they don’t, consumers ought to question why.”
The UK’s 20 largest property developers now take 56 days on average to pay sub-contractors, up from 54 days last year, resulting in severe cash flow problems for smaller construction companies, says Funding Options, the UK’s leading online alternative business finance matchmaker.
Construction sub-contractors are facing growing cash flow problems — average time taken by the 20 largest UK construction firms to pay their suppliers.
Funding Options says that the failure of major developers to pay invoices in good time is damaging their sub-contractors’ growth prospects and in some cases threatening their viability. Without swift payment of their invoices, small companies such as bricklayers and carpenters cannot budget effectively and face severe funding issues.
These problems are being exacerbated by a slowdown in the construction industry since the second quarter of 2015.
The delays are jeopardising the ability of smaller construction companies to pay wages on time and bid for future work. The claim that big developers are sitting on the money owed to contractors is supported by the fact that large developers are paid by their own customers in 39 days. This is more than two weeks faster than they pay sub-contractors.
The study by Funding Options shows payment delays have been increasing since 2014, when it was taking developers 48 days to pay their suppliers such as electricians and plumbers.
It adds that with the Government setting a challenging target of one million new homes to be completed by 2020, it is more important than ever that payment delays in the construction sector are tackled as soon as possible.
Conrad Ford, CEO of Funding Options, says: “Smaller sub-contractors face the risk of bankruptcy if they are not paid within a reasonable amount of time.”
“Increasing numbers of small construction firms need help to cover those gaps in their cash flow.
“Major developers feel they have a lot to gain from delaying payments, knowing that their sub-contractors would be hesitant to raise their issues for fear of losing out on future work. There seems to be only two choices for the suppliers: accept these slow payments or lose the business going forward.
“These kinds of problems also won’t help the Government in hitting the very demanding targets it has set for new home completions.
Funding Options says that, technically, businesses are permitted to charge interest and other additional costs if their payment agreements are breached. However, smaller businesses rarely impose these charges as they need to avoid upsetting the companies they rely on for future business.
Conrad Ford says: “There are a few ways to allow firms to cover the gaps in their balance sheets. One of these options is bridging loans, which help them to accept new contracts, and be forward looking instead of dwelling on work they’ve already done.
“Funding Options puts smaller companies like sub-contractors in touch with suitable lenders, allowing them to plan ahead confidently and getting rid of doubts about whether they’ll have the costs to carry work out.”
Interesting Research conducted by Yell has highlighted invisibility issues online for small businesses.
Yell, one of the biggest providers of digital marketing in the UK, has discovered an overwhelming majority of builders (87%) it researched have wrong or inconsistent information online, including basic details such as a phone number or email.
Feedback shows 89% of customers say they will try another company if the details listed online for a particular business are incorrect, suggesting many small businesses, including builders, are missing out on a lot of potential custom.
Yell conducted research into how the 50,630 builders in its UK database appear online, also asking customers nationwide about their online habits and expectations. The results paint a gloomy picture pointing to some basic errors in small businesses’ approach to reaching potential online customers.
Key facts:
51% of customers said when they were looking for a new service, the most important source of information was a website
Having inconsistent or non-existent information online means small businesses are missing out on potential custom with 54% of people relying on positive online reviews when deciding on a new local business or service
- There are 93 builders names in the UK beginning with the name “Alan”
- There are 145 builders names in the UK beginning with the name “Andrew”
- There are 104 builders names in the UK beginning with “Complete”
- There are 381 builders names in the UK beginning with the name “Dave” or “David”
If a company’s information online is wrong, it’s arguably worse than not being online at all. – Mark Clisby, Yell’s Marketing Director.
“Not only is the company effectively invisible to customers, it can also seem careless or even untrustworthy. This often happens because companies don’t always know all the listings sites where they appear, or when they move they forget to update their information. It’s easily done, but can be incredibly damaging for business.”
“A lot of small businesses tell me they get all their business from word of mouth and don’t need to be online. However, they’re ignoring the fact that word of mouth has moved online, with more than half of all customers choosing a local business based on online reviews. That’s a lot of work to be missing out on,” concluded Mark Clisby.
To support small businesses, Yell has launched Connect, a service recognising the importance of connections, word of mouth recommendations and referrals. It helps business owners make their details visible online and get in front of the people looking for local products and services.
Connect uses smart technology to automatically list and update business details everywhere they need to be online, accurately and consistently. Details include company name, address, telephone number, logo, opening hours and payment methods on sites such Facebook, Twitter, Google+ and 100s’ of other high profile sites. As part of the service, Connect also helps set up social profiles on Facebook, Google+, Twitter and Foursquare. A centralised dashboard enables customers to view analytics, monitor and respond to online reviews, and post both real-time and scheduled updates on their social networks, as well as update their business details online at the click of a button.
Yell is offering small businesses in the UK the chance to try out Connect by completing a free scan of their business online. By entering the business name and address, Connect is able to identify how visible a business is online and, most importantly, report on how accurate the information is. On average, over 240 people a day are running the free Connect scan to check business details online.
Additional interesting insights revealed by Yell’s research into small businesses across the UK within its database showed that:
- 5,612 small business names include the phrase “& Sons” or “& Son” but only 30 contain the phrase “& Daughters” or “& Daughter”
- The most popular letter for small business names in the UK to start with is ‘A’, with 1 in 10 starting with ‘A’
- The first five letters of the alphabet, A-E, account for 40% of the first letter of all small business names in the UK
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