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Materials’ price rise squeezes SME builders

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Price up: Building material price is harming SMEs

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):

  1. Bricks were in shortest supply with the longest reported wait time being more than one year;
  2. Roof tiles were second with the longest reported wait time being up to six months;
  3. Insulation was third with the longest reported wait time being up to four months;
  4. Slate was fourth with the longest reported wait time being up to six months;
  5. Windows were fifth with the longest reported wait time being more than one year;
  6. Blocks were sixth with the longest reported wait time being up to four months;
  7. Porcelain products were seventh with the longest reported wait time being more than one year;
  8. Plasterboard was eighth with the longest reported wait time being up to two months;
  9. Timber was ninth with the longest reported wait time being up to two months;
  10. 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.”

Berry continued: “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.”

Berry concluded: “We are calling on builders merchants to give their customers as much advance warning of forthcoming material price 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.”

Business

Welsh Government releases additional £100M business support

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The latest phase of the Welsh Government’s Economic Resilience Fund has benefited from the release of a further £100million from ministers within 72 hours of launch, due to a massive demand.

More than 6,000 grant applications from small and medium sized businesses and social enterprises were received within 24 hours of the launch on Friday – an unprecedented response, revealing the scale of the challenges facing Welsh businesses.

The Fund aims to complement and fill the gaps left by UK Government schemes such as the Job Retention Scheme, with grants of up to £10,000 for micro-enterprises and up to £100,000 for SMEs and a light touch appraisal system designed to get money to businesses with the minimum of delay – as well as a new loan fund administered by the Development Bank of Wales.

Less than three weeks since the First Minister announced the intention to create the Fund, the Welsh Government has released a further £100 million, taking the grant fund to £300 million. This will supplement this latest phase of support, providing non-repayable grants to microbusinesses, SMEs and those large businesses of critical, social or economic importance to Wales.

The Fund has been warmly received by trade union and business organisations, with the Institute of Directors calling it ‘very welcome news for business owners and managers who are desperate for all the help they can get at this difficult time’. The South and Mid Wales Chambers of Commerce has called ‘the rapid response to date’ of the Welsh Government in supporting the economy of Wales ‘impressive’. The Wales TUC welcomed ‘additional funding to address the gaps’.

Minister for Economy, Transport and North Wales Ken Skates said:  “We knew that even with the help offered by initiative such as the Job Retention Scheme, there was a massive need for quick access to grant funding if Welsh businesses were to survive this unprecedented economic shock. Whilst in order to make the scheme quick and simple we needed to take tough decisions over eligibility – like requiring businesses to be registered for VAT as a way of having to check on their trading history – it is clear from the level of response received that the Economic Resilience Fund is plugging a gap in UK Government support and providing much needed financial reassurance to many businesses at this challenging time. We will continue to review support and consider how we can develop it over the coming days.

“The rate of applications has been massive and unprecedented. This is the second time in a matter of weeks that access to Welsh Government funds aimed at easing cash flow pressures for Welsh business have quickly reached capacity, and we have responded with pace to release a further £100m into this phase of the fund.

“In these difficult and demanding economic times we have worked hard to free up resources to create such a large Fund despite the huge demands on our budget, and to strike a balance between supporting as many enterprises as possible and making a meaningful contribution to each one’s survival, as well as asking each recipient to sign up to the principles of the economic contract.

“Though we applaud much of what the UK Government has done, there is an urgent need to see more of the promised lending guaranteed by the UK Government getting to the front line. The UK Government must continue to support and press the high street banks to be much more responsive to the needs of our businesses at this difficult time.”

Finance Minister Rebecca Evans said: “The Economic Resilience Fund is part of more than £2bn of support that we have made available to help businesses and charities during these incredibly difficult times.

“We know that support for business is crucially important but whilst we are doing everything we can in Wales to plug any gaps and provide the best possible financial support to businesses, it is clear there are further steps that the UK Government needs to urgently take.”

The Economic Resilience offers financial support to help businesses, charities and social enterprises deal with the coronavirus crisis and will be vital in helping organisations manage cash flow pressures. It is a unique additional funding stream for Wales and was designed to address gaps not currently met by schemes already announced by the UK Government, Welsh Government and Development Bank of Wales.

The first stage of the Fund saw the £100 million Development Bank of Wales’ loan scheme fully subscribed in little more than a week. Applications are currently being processed and some businesses have already received funding. It is anticipated that the Development Bank will have processed all applications received within the month.

To ensure that money reaches businesses as quickly as possible more than 120 additional Welsh Government and Business Wales staff have been diverted onto processing applications and supporting businesses and organisations in this latest stage of the Fund.

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Business

Smarter working for a smarter workforce

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THE WAY an organisation responds to challenges is testament to its values, its planning and its employees.

Covid-19 has gathered pace which has been unprecedented – and is a situation that the majority of us could never have anticipated.

Facing this pandemic and being prepared has been a challenge for all tiers of Government – but Pembrokeshire County Council’s capability to reposition its workforce is thanks to embracing the Smarter Working approach.

Our investment in technology has enabled the organisation to have more than 750 staff working flexibly to keep vital services running.

Introduced in the summer of 2018, the Smarter Working project is about harnessing the potential of flexible working in a strategic way, to deliver benefits both for employees and the business.

It is well-recognised that the principles of Smarter Working acknowledge that technology and flexible working patterns are changing the way we work for the better.

Councillor Neil Prior, the Council’s Cabinet Member for Transformation and IT said: “The Council’s employees understand that we are in a fast-changing communication and technology world.

“Culture and behaviour change has enabled us as an organisation to benefit from the advances in IT and an improved flexible use of our estate.

“I’d like to thank the IT team who have been working incredibly hard to support our Business Continuity planning. The investment we have made in technology over the last couple of years has meant that we’ve been able to see a greater number of staff work from home, which is exactly in line with the Government’s advice to ‘work from home where possible’.

“I would also like to thank staff who have adjusted their working patterns and are going over and above in their efforts to prepare our County to respond in the best possible way to the current situation.”

The world of work is changing, and people no longer need be tied to a desk. Pembrokeshire County Council can now work smarter, in a way that saves money, time and improves productivity.

As part of the Council’s approach to smarter working and refining the estate – two key changes were implemented.

The conversion of Haverfordia House – which previously accommodated staff – into a reablement centre also enabled the Council to list the Cherry Grove building in Haverfordwest as surplus to requirements, ensuring cost avoidance over the next 10 years stretching into millions of pounds.

Regarding the response specifically to Covid-19 – the stats are impressive. They include:

  • 95 per-cent of IT department working remotely
  • Skype – average unique users logged in: 1,200
  • almost 14,000 one-to-one skype sessions – this equates to more than 1,200 conferences and in excess of 60,000 audio and video minutes used
  • figures showcase the Council’s ability to enable its staff to work flexibly and keep vital services running
  • Community Hub has received more than 700 calls
  • the Council’s Cabinet is continuing to meet via videoconferencing.

Councillor Prior added: “We take pride in the relationships that we are building with our communities – and I am extremely proud of the work that has gone into the planning and the commitment shown by the Council’s staff.

“Pembrokeshire County Council has a history of positive relationships with our colleagues within health, third sector agencies and emergency services – and we are all working together to support each other through this challenging time.”

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Business

Covid 19 grants for small businesses

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COUNCILLOR PAUL MILLER, the Authority’s Cabinet Member for Economy, Tourism, Leisure and Culture, has announced that applications for business support grants can be made from today (March 27, 2020).

Access to the online application form can be found on the Council’s Business webpage via the following link:
https://www.pembrokeshire.gov.uk/business-advice-and-support

You can email other business enquiries about the impacts of Covid 19 via the following email address: covid19businesssupport@pembrokeshire.gov.uk
Councillor Miller said: “The team have been working flat out to get this scheme up and running as we know just how important this support is to business right now.
“Government has promised the cash will be with us by the 1st April and the second it is, we’ll be distributing that support to our businesses.”

The following grants are available to small businesses to support the costs associated with the impact of Covid 19 on their businesses as follows:
• small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
• grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
Councillor Miller added: “I know our local businesses are doing all they can to sustain jobs and livelihoods. Our job is to get assistance to them as quickly and efficiently as possible.
“While our application form wasn’t the first to go live – we were hoping not to need an application at all – we have developed an automated system which will allow us to begin making payments, into businesses bank accounts, the minute funds arrive from Government.”

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