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Dual costs threat to ductwork firms

A double whammy of new tax rules driving up labour costs and rising steel prices could put ductwork contractors under severe pressure, a senior figure has warned.

Many contractors are bidding for work at “potentially suicidal” prices despite the dual threat, said Gareth Vaughan, immediate past president of the Heating and Ventilation
Contractors’ Association.

He told last week’s HVCA Ductwork Group annual general meeting that forthcoming European
legislation was set to drive up contractors’ labour costs while the price of raw materials, particularly sheet steel, could also rise dramatically this year.

“There are major changes coming to employment law covering ‘bogus’ self-employment and agency labour that could affect us all,” said Mr Vaughan, managing director of ductwork contractor E Poppleton & Son.

“More people will enjoy the perks of direct employment if they have been working for a contractor for more than 12 weeks.”

He also said that the HVCA had been consulted by HM Revenue & Customs about rule changes that could lead to all workers in the construction industry being deemed directly employed for tax and National Insurance purposes.

“With steel prices also set to rise, perhaps as high as £1,000 a tonne by the end of the year, contractors have to be careful about how they price jobs,” added Mr Vaughan.

“However, we know people are bidding some work at 30 per cent below where the price should be. This is potentially suicidal for the firms quoting at these prices and possibly devastating for the ultimate client should the contractor fail and be unable to complete the project.”

New group chairman Kevin White also expressed concern at the ongoing uncertainty in the market.

“Despite what economic experts might be saying, the worst is very far from over,” said Mr White, who is managing director of Senior Hargreaves. “We have seen some long-established firms disappearing this year, which is very disturbing.”

Mr White said the sector needed to develop a new mindset. “Profit is not a dirty word,” he  said. “We must get back on an even keel where clients pay a fair price for our work. Cash will be king over the next 12 months and we must focus on getting our money in.”

Mr White added that the industry’s current difficulties highlighted the importance of
improved integration in the supply chain. The Ductwork Group has produced two publications aimed at demonstrating how professions can co-operate more closely to cut the waste and delays that eat into profit margins.

Working Together and Guide to Good Practice for the Installation of Fire and Smoke Dampers (DW145) seek to improve professional links and streamline the supply chain.

One of the report’s authors Jim Murray of Ductsolve said: “The fact that we have been able to get the support of CIBSE is significant as it means the design professions are listening to the specialist contractors that implement their designs.”

Working Together is a blueprint for more harmonised working practices to reduce adversarial
contracting and speed up delivery. For more information, visit www.hvca.org.uk.