Surprise over costs claim
CONSTRUCTION contractors on Teesside say they are surprised by research that claimed firms are not passing on rising raw material and wage costs to customers.
According to the latest Tender Price Index compiled by the Royal Institution of Chartered Surveyors (RICS), costs rose by 1.1% in the first four months of 2008, but the price of new construction work fell by 2.4%.
Local industry bosses said smaller firms were scared of passing on cost increases, while inflexible contract agreements could force firms to withhold price increases.
Roger Wilson, general manager of G Sweeney Ltd in Stockton, said: “Many firms would like to pass on the price of raw materials to customers but they are tied to fixed-term contracts. I would find it difficult to comprehend if they don’t factor in price increases once the contracts are up for renewal.”
Bob Borthwick, business manager for Thornaby-based Scott Brothers, a supplier of waste disposal services to the construction industry, said: “Contractors are finding it difficult to pass on costs to house builders. We are adding fuel surcharges but there has been resistance from some firms.”
The concern is that a boilerhouse of withheld price increases will see rapid inflation in tenders and potentially a fall in new orders later this year.
Douglas Kell, regional director of the Civil Engineering Contractors Association (North-east), said: “The situation for a number of small firms in contracting and civil engineering threatens to become parlous. Our organisation’s latest 12-month survey nationwide suggests small firms in the North-east and Yorkshire are suffering more than anywhere else from weakening order books, and less demand for development on building sites.
“While big housebuilders will hopefully pick up before long, it’s contractors and civil engineers who are first to be told: ‘Sorry, there is no more work.’
“They then have little alternative but to absorb more of the rising costs for whatever work they do get.
“The one thing for sure, particularly for smaller firms, is that there is only so much of the higher costs that they can absorb.”
