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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

Businesses’ Brexit fears dismissed

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Airbus: Warned of risk of capital flight

THE RECENT conduct of Foreign Secretary Boris Johnson has led to fears that the future of the UK’s business relationships with Europe are of secondary interest to senior government ministers.

A strongly-worded statement from the CBI, warning policy makers to ‘focus on business priorities and put evidence above political ideology’ was greeted with Mr Johnson remarking ‘f**k business’.

Those remarks were preceded by the Foreign Secretary being recorded saying that the border with Ireland was a minor issue of little consequence in the context of Brexit.

The CBI subsequently suggested that it will ensure negotiators on both sides ‘are well equipped with the unequivocal economic facts’.

Whether the facts fit the Foreign Secretary’s preconceptions of what Brexit might mean for the UK’s businesses is open to question.

AIRBUS RAISES STAKES

A similar gap between reality and ideology was exposed by the warning from Airbus that – in order to continue to comply with the European regulatory framework – it might have to move its base of operations from Broughton in Clwyd, where it supports 6,500 directly employed jobs and businesses and the economy over a much wider area.

In the absence of a Brexit agreement, UK aerospace companies will not be covered by existing approvals. More than 10,000 original aircraft parts originate in the UK, the manufacture of which is covered by tight regulations requiring certification by the European Aviation Safety Agency. Should a single parts supplier not be certified, its parts cannot be installed and aircraft will not be delivered.

If a supply chain agreement is not reached with the EU, the consequences for the aviation industry selling into the EU trading bloc will be a disaster for the UK.

BUSINESSES TOLD TO BUTT OUT

However, the unwelcome intervention of facts in the Brexit narrative roused Health Secretary Jeremy Hunt to tell the BBC’s Andrew Marr that talking about job losses risked undermining the government in its negotiations with the EU.

“It was completely inappropriate for businesses to be making these kinds of threats, for one simple reason. We are in a critical moment in the Brexit discussions. We need to get behind Theresa May to deliver the best possible Brexit, a clean Brexit.”

Mr Hunt’s comments were supported by leading Brexit enthusiast Liam Fox, the Secretary of State for International Trade, who also suggested that businesses warning the government based on their own detailed knowledge of the regulatory regimes under which they work were somehow placing the UK Government’s negotiating position – which is as yet both unknown and possibly undetermined – at risk.

The key economic issue for businesses is ensuring the sort of continuity in trading arrangements which secures jobs and encourages investment. Large businesses need a significant amount of time to make decisions on the allocation of resources, particularly in the face of unpredictable trade policy by twitter approach of the US Government. Short of certainty, and faced with a capricious transatlantic trading partner which scraps trade agreements and treaties at short or no notice, businesses are understandably twitchy about their inability to plan and the absence of meaningful interaction with them by the UK Government’s crack Brexit team.

In a carefully-phrased statement to MPs, Business Secretary Greg Clark told MPs: “Any company and any industry that supports the livelihoods of so many working people in this country is entitled to be listened to with respect.

“The government has been clear that we are determined to secure a deal with the EU that meets the needs of our aerospace firms and the thousands of people whose livelihoods depend on them.”

IRISH TRADE KEY FOR WEST WALES

Meanwhile, businesses have struck back at the apparent indifference of the UK Government’s key Brexit ministers to the interests of businesses which stand to be affected directly should the UK reach no regulatory deal – or a poor regulatory deal – with the EU.

Business groups the CBI, Chambers of Commerce, Federation of Small Business, the Employers’ Federation, and the Institute of Directors are placing pressure on the government to reach agreement on trade, customs, and immigration.

Pembrokeshire’s MPs, Simon Hart in Carmarthen West and South Pembrokeshire and Stephen Crabb in Preseli Pembrokeshire, are in an intriguing position over the issue of Irish trade.

With major ferry ports in Pembroke Dock and Fishguard, both Conservatives have a dog in the race to ensure that trade with the Republic of Ireland is at least maintained at current levels.

100,000 lorries were carried to Ireland via ports in Pembrokeshire in 2015. Any disruption of that trade, by the introduction of customs and immigration checks for example, would significantly reduce the attractiveness of west Wales’ ports to businesses trading with Ireland. That is not, however, a one way street. The Irish Government is also keen to maintain access to the UK as an access point to mainland Europe.

While the ports are not in themselves major employers, the ‘ripple effect’ of any loss or reduction in through traffic and any subsequent job losses could be significant. And concerns have been magnified by Stena’s decision to scrap a significant investment plan in Fishguard.

When we asked to respond to the Foreign Secretary’s views on the Irish Border issue and the importance of trade with Ireland to Pembrokeshire, Simon Hart said: “I have spoken (very informally) to [Boris Johnson] to make that point, which he says he recognises. The border issue might be minor in the overall context of Brexit but it is nonetheless very important.”

Stephen Crabb told us: “I have said right from the start that the issues over trade between the UK and Ireland, including the question of the Northern Ireland border, are some of the most complex and important of the Brexit negotiations.

“For us in Pembrokeshire it is important because of our trade links with Rosslare and I have raised this matter with Ministers in Ireland, the Cabinet in Westminster. The commitment that the Prime Minister has given that there will be no additional trade barriers for East-West trade between the UK and Ireland is crucial and reflects the points that I and others have been putting to her.”

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Business

Language skills’ decline threatens tourism

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'But everybody speaks English!': Language skills gap undermines tourism industry

A REPORT released by leading travel trade association UKinbound, has uncovered a growing language skills gap facing the UK tourism industry, caused by a combination of Brexit and the decline of language training in the UK.

The new research undertaken by Canterbury Christ Church University highlights the current lack of capacity in the UK’s education system to meet the shortfall in higher level language skills which are badly needed by the UK’s inbound tourism industry.

To date, tourism organisations have been largely reliant on EU nationals for their technical and ‘soft’ language skills and concerns are rising in the industry about the attrition of these employees. Approximately 130,000 EU nationals departed the UK in the year to September 2017– the highest number since 2008.

Furthermore, a sharp decline in the number of young people studying a foreign language, arising in part from changes to government policy since 2002, combined with a lack of awareness of the opportunities and career paths open to language proficient graduates in the tourism and hospitality sector, are major contributors to the widening language skills gap in the sector, at a time when access to future EU employees is uncertain.

Key findings of the research:

Of the 78 institutions offering tourism and/or hospitality undergraduate programmes in the UK, only 25 offer languages as part of their tourism/hospitality curriculum.

45 institutions offer 87 postgraduate tourism/hospitality programmes – yet only 6% of these programmes offer a language, as an optional module.

The audit identifies Institution Wide Language Provision and study abroad opportunities as alternative ways for students to add an international dimension to their studies

From a sample of 43 higher education institutions that offer a single honours modern language degree programme, only 16 mention tourism as a career prospect.

Interviews with modern language programme directors highlighted a lack of knowledge of the tourism sector and tourism specific career pathways.

The report also features an Evidence Review, drawing on data from previously conducted research and reports, creating a clearer picture regarding the diminishing supply of home-grown linguists

Pupils taking languages at A-level fell by a 1/3 in 20 years (1996-2016)

French declined from 22.7k to 8.5k

German from 9.3k to 3.4k

Spanish increased from 4.1k to 7.5k.

German is no longer a dominant language taken at A-level. French and Spanish continue to be key languages, despite the declining popularity of French.

There has been an uptake in the study of key UK inbound growth market languages; Mandarin and Arabic, but the growth of the talent pool here is slow and limited.

Social, regional and gender inequalities in the uptake of languages are striking.

The number of UK universities offering language degrees has dropped by 30% between 2000 and 2015.

Deirdre Wells OBE, chief executive officer, UKinbound said, “The UK is currently the fifth most visited country in the world and our inbound tourism industry in 2017 contributed an estimated £25 billion to the UK economy. Those working in tourism need to be able to communicate effectively with their international visitors and our tour operators in particular need employees who can communicate confidently and negotiate contracts with overseas operators and suppliers. The industry currently employs large numbers of workers from the European Union to fulfil these roles, but our members are reporting that many of their EU employees are starting to return home. They are struggling to find replacements from within the British workforce, predominantly due to their lack of advanced language skills.

“This report clearly shows that the country needs leadership from the very highest levels to address this impending language crisis, to ensure the tourism industry continues to provide world class customer service and remains competitive in the global marketplace.”

Dr Karen Thomas, Director of the Tourism and Events Research Hub, at Canterbury Christ Church University added: “The uncertainty of the Brexit negotiations appears to have pushed the tourism and hospitality sectors to a critical point, where they not only have to consider the valuable role of EU workers, but also need to evaluate the potential of home-grown talent to meet the needs of the future inbound tourism industry. This research is particularly timely given the body of evidence which has been developing about the decline of home-grown linguists and the potential this has to impact on UK productivity and competitiveness in a post-Brexit landscape. For the UK inbound tourism industry, where language skills and intercultural understanding are crucial in business and consumer-facing roles, the findings of this study raise challenging issues to be addressed by a wide range of stakeholders.”

UKinbound also recently surveyed its members regarding their need for graduates with language skills. Just 34% of members had employed graduates with language skills in the last five years, but 65% of members are now considering employing graduates with language skills in the next five years.

The report findings coincide with the launch of UKinbound’s campaign to highlight the contribution of tourism from EU countries to the UK economy, and to impress on the Government the urgency of securing either no, or minimal, barriers to inbound tourism from the EU post Brexit.

Wells added, “In 2017, two-thirds of inbound visitors came from the EU and contributed an estimated £10 billion to the UK economy. We are calling on the Government therefore to prioritise the need for minimal disruption to this flow of visitors in the Brexit negotiations. Any onerous entry requirements post Brexit will hurt the sector, the economy and cost jobs and any delay risks undermining the sectors ability to prepare for the post Brexit environment.”

The tourism industry is the UK’s third largest employer, employing 3.1 million people (over 9.6% of the UK workforce) and contributes £126 billion to the UK economy, (7.1% of GDP). The UK receives 67% of its tourists from the EU.

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Business

Cabinet Secretary focusses on automotive industry

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Ken Skates: Uncertainty over future demands attention

CABINET S​ECRETARG​ for the Economy, Ken Skates, has highlighted the achievements and issues faced by the automotive sector in Wales during his keynote speech at this year’s Autolink event.

Organised by the Welsh Automotive Forum (WAF) and supported by Welsh Government, Autolink is the premium automotive business to business event in Wales.

Ken Skates said: “These days, it seems the automotive sector is rarely out of the news headlines.

“We find ourselves talking about a host of subjects, from the unknown impact of Brexit and the associated effect on investment and car sales, to the need to improve air quality fuelling issues such as the debate over the future of the diesel engine, use restrictions in city centres and the uptake of alternatively fuelled vehicles. Not to mention being asked to consider the development of autonomous vehicles and what they mean for future car ownership and personal mobility.

“With these issues and more creating uncertainty, it is right we should come together to put the spotlight on the sector in Wales.”

Autolink 2018 will consist of around 200 attendees including 50 exhibitors drawn from the Welsh based automotive supply chain, representatives from vehicle manufacturers and Tier 1 suppliers (companies supplying components directly to the chain’s original equipment manufacturer), academia and visitors from the wider supply chain community.

Ken Skates continued: “There are many topics open to discussion here – free movement of goods and people and the absence of tariff and non-tariff barriers, the Welsh Government’s Economic Action Plan, reducing carbon emissions. I could go on.

“Here in Wales, we have strengthened our commitment towards reaching our own emission reduction targets. Our Environment Act sets out a clear decarbonisation pathway for Wales within the context of our existing UK and international obligations, with a reduction in emissions of at least 80% by 2050.

“Decarbonisation has a significant place in our new Economic Contract which is part of our innovative Economic Action Plan. This will see a new way of working with businesses to create wealth, jobs and wellbeing.

“Change and a degree of uncertainty are part of the environment with in which we all operate. To prosper, we must all adapt to that new environment.”

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