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Contractors busy in spite of commodity price hikes

M&E contractors remain busy, despite being squeezed by surging energy and commodity prices, falling house-building workloads, and discounting on invoices and poor payment practices.

That was the defiant message being issued from organisations representing specialist contractors after it emerged that in the past six months, HVACR manufacturers had raised product prices by an average of 10 per cent in order to absorb raw-material increases. 

Manufacturers justified the move by claiming the faster-than-expected rises in the costs of oil, copper, steel, aluminium and energy had had  a significant impact on their manufacturing and logistical costs. Critics claim that they are behaving irresponsibly by raising prices at a time when the economy is hovering on the brink of recession.

Cedric Sloan, director-general of FETA, rejected the criticism. “It is unavoidable,” he said. “Commodity price increases have had an enormous impact on our members’ businesses. A survey of our ductwork contractor members found that basic steel prices had risen by 50 per cent and there is potential for another 50 per cent increase over the next six months.

“Throughout the HVACR sector, everybody operates on miserable margins and you cannot accommodate the increases in the price of raw materials without increasing your own prices. Everywhere you look you will find that running a business costs more. It’s not simply that manufacturers are acting irresponsibly; if they don’t increase their prices, they will go under.”

Rod Pettigrew, HVCA head of commercial and legal, said despite the challenging economic climate, work was abundant. “We’re in a curious economic situation,” Mr Pettigrew explained. “Some of our members work in the housebuilding sector but a lot of our members work in a diverse range of areas.

“None of our members are reporting a downturn in workloads. Our members are still reporting that they are very busy because of all the public sector work available. There are payment problems and, given the current economic climate, we do expect these to rise. On the whole our sector remains active.”

Professor Rudi Klein, chief executive of the Specialist Engineering Contractors’ Group, reported similar findings: “In the engineering sector members are still working and are still very busy, although this does vary regionally and is dependent on the sector. The North of England and Scotland is still very busy because of all the work that is coming out of the Glasgow 2014 Commonwealth Games, and there is still lots of work coming through with schools and hospitals.

“There does appear to be a problem with housing. M&E firms which do a lot with housebuilders are experiencing a decline in workloads, especially if they deal with private residential property, and we are beginning to see problems emerging with commercial buildings.”

Suzannah Nichol, chief executive of the National Specialist Contractors Council, said: “We know that specialist contractors work three to nine months ahead and this could be why [activity is so buoyant] but I think from the next quarter onwards we will begin to see a clear picture of the market emerging, and it’s going to get difficult. We’re getting mixed messages from our members but the next quarter will be significant.”