Soaring material costs for SMES

Published date: 31 July 2017

In the months ahead of Brexit many SMEs had concerns over the rising material costs. Now that Article 50 has been triggered, those concerns have become reality. New research from the Federation of Master Builders (FMB) reveals a third of small building firms say that soaring material prices are squeezing their margins and almost a quarter have had to pass these price increases onto consumers.

Since the depreciation of sterling following the EU referendum in June 2016, there has been a range of material price increases including the following:

1) Timber

2) Insulation

3) Bricks

4) Blocks

5) Windows

6) Plasterboard / slate (joint sixth)

7) Boilers and radiators

8) Porcelain products

 

The impact of these material price increases have been wide-ranging and include:

  • 85% of builders think material price rises could drive consumers to hire rogue traders in an effort to save money on their building projects;
  • One third of construction SMEs (32%) have had their margins squeezed;
  • Almost one quarter (22%) have been forced to pass material price increases onto their clients, making projects more expensive for consumers;
  • More than one-in-ten builders report making losses on their building projects due to material price increases.

Brian Berry, Chief Executive of the FMB, said: Timber is the material that the majority of builders say has increased most in price but the problem doesn’t end there – everything from insulation to windows to bricks and blocks are soaring in price. 

Although the biggest concern is one-in-ten builders say that they’ve actually made losses on projects due to material price increases – this is most likely to happen when a particular product or material jumps up in price mid-project when then builder has already quoted for the work. 

Berry concluded: Material price spikes aren’t just a problem for builders – they’re also a problem for the home owner. As projects now cost significantly more, consumers are feeling the pinch and it might be that they decide not to commission that loft conversion or extension after all. Or worse still, homeowners could be tempted to hire rogue traders who are quoting a lower price than a professional professional building firm such as those that belong to the FMB. As a result, there could be a flurry of botched jobs and distressed consumers. 

Read the full research results here 

 

Keep in touch with FMB Insurance

For regular updates from FMB Insurance, sign-up here with your email address.