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Cost inflation forces SMEs to pass on costs

The soaring cost of materials has forced almost a quarter of construction SMEs to pass on price hikes to clients as their margins are squeezed.

Research by the Federation of Master Builders found that the costs of raw materials including timber, insulation, plasterboard and bricks have led to fears that consumers may turn to “rogue traders” in an effort to save money.

More than 10 per cent of builders also reported that they had begun to make losses on their projects due to material price rises.

The FMB said the cost of timber had risen by around 20 per cent and Spanish slate by 22 per cent in a year.

A third of small building firms (32 per cent) said soaring material prices were squeezing their margins, while almost a quarter (22 per cent) have had to pass these price increases onto consumers.

Andrew Sweeney, managing director of SME contractor Care Building Services, said: “Of course prices do go up all the time but in January a particular type of block went up by 17 per cent; insulation went up by 10 per cent. 

“If you are pricing a job and don’t allow for that, it makes a massive difference.

“We are getting a letter every month saying that the prices are going up.

“Margins are automatically being squeezed. We have one [refurbishment job] which is now costing us money to finish.

“The worry is people starting to over-trade, taking on more work than they can cope with and then extending their own payment terms.”

FMB chief executive Brian Berry said: “This research shows that following the fall in the exchange rate, timber is the material that the majority of builders say has increased most in price.

“But the problem doesn’t end there – everything from insulation to windows to bricks and blocks are soaring in price.

“A third of builders report that these price increases are eating into their already razor-thin margins – and this on top of increased wages and salaries stemming from long-term construction skills shortages.

“Material price spikes aren’t just a problem for builders – they’re also a problem for the homeowner, with almost one quarter of builders saying that they have had to pass on price increases to their clients.

“This means building projects now cost significantly more than they did this time last year.”

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