As the raised energy price cap pushes up the average household bill to approx. £3,450 per year from October and concerns across the country are reaching fever pitch, we’re looking at whether there are plans in place to help the sector. As an industry that relies on energy-intensive materials and heavy machinery, construction is feeling very exposed to the effects of price shocks.
While households have an energy price cap, businesses have not previously had that relative luxury. Rising energy costs have had a direct impact on the cost of materials and how sites operate.
Actively monitoring the energy market and making bulk purchases can help reduce energy costs but are there any plans to help the industry survive the current crisis?
The government has finally listened to the desperation of businesses and introduced the Energy Bill Relief Scheme to help business owners with soaring energy costs. This new scheme will fix electricity and wholesale gas prices for all non-domestic energy customers. Although it is worth noting that the level of price reduction your business will get will depend on the type of contract you’re on. It is not however a ‘cap’ on prices but rather a discount on the wholesale price suppliers pay for energy and currently will only run for 6 months, starting on 1st October. A recent announcement has allowed businesses to backdate to 1st December.
In August, the Department for Business, Energy and Industrial Strategy launched a consultation on support for energy-intensive industries, including cement, steel and glass manufacturing which would see these industries receive more relief on their electricity and gas bills.
One of the options detailed is also a move by the government to allow businesses to be exempt from environmental and policy costs. As it stands, the exemption has cut costs by 85% but the new consultation would raise this to 100%.
This move reflects higher UK industrial electricity prices than those of other countries, including Europe.
According to the Federation of Master Builders, 98% of its members are facing rising material prices. They are recommending a cut in VAT to 0% for repair, maintenance and improvement work in the short term. In the longer term they suggest a nationwide retrofitting programme be introduced. This would provide a pipeline of work for construction as well as slash the cost of homeowners’ energy bills.
At Buttle’s we’re doing what we can to alleviate the pressure, both for ourselves and our customers. This includes monitoring the market and manufacturers, bulk buying and looking at cost reductions to keep prices as low as we possibly can.
13 July 2022
There is only one topic on everyone’s lips at the moment, inflation. With numbers reaching historic levels of over 25% we want to look at the impact this is having across the construction industry and how you can mitigate it. With 2022 already plagued by material shortages in the early part of the year and fuel repeatedly hitting record highs, the continuing rise of inflation has seen businesses facing real challenges.
Over the last 18 months we’ve seen prices continue to rise on materials due to lengthening lead times and growing demand. This has made it increasingly difficult for manufacturers and suppliers to build up stock levels. Factor in the impact of the war in Ukraine and the direct impact on material costs as both Russia and Ukraine are critical suppliers of metals, raw materials, chemical products and machinery and we are seeing an extended period of economic uncertainty.
Availability has improved since the beginning of the year. We are still seeing some availability issues on products such as bricks and blocks but timber and chipboard have seen significant improvement as the market becomes more adept at managing supply.
Average energy bills rose by 54% in April, which is putting pressure on construction firms due to energy intensive industries including concrete, steel and cement passing on the impact of higher prices. The increase in the price of raw materials in March was the highest in six months.
So how can you avoid falling victim to soaring inflation?
Manage expectations: It is important to discuss the details and potential pressures that might lie ahead in delivery ahead of time. Don’t tie your quotes to current prices. Show the cost of labour and materials separately, ensure that the customer is aware that prices on materials are likely to change and they will pay the cost on ordering.
Consider your options: Are there any alternative approaches you could take to reduce your exposure to risk but still provide you with the same results?
Plan ahead as best you can: The continued rise of material costs does not look likely to peak any time soon. With that in mind you need to order at your earliest opportunity to limit the chance of future cost inflation.
We understand that these are difficult times and that you’re likely doing all of the above as much as possible already. At Buttle’s we will support you by continuing to offer the best possible price for your materials and offering you clear and honest advice.