What effect is the artificially low cost of building materials having on the building industry? Can we really sustain an industry based on a price promise that seems a little too good to be true?
At face value, all their Christmas’s and birthdays appeared to have come at once for the builders of Bristol and Swansea, when two local branches of a leading merchant chain recently knocked some key product prices back to the 1990s. Initially done as a celebration to mark some significant milestones in their history, the promotion subsequently raised some intriguing conundrums when it emerged that some items were actually cheaper now than two decades ago – and not just in real terms.
Of course, there was no question that the merchant would renege on its promise, but it was certainly not alone in thinking how, for example, a pint of beer has risen from 99 pence to an average £3.51 (an increase of 234 per cent) and a first class stamp from 22 pence to 63 pence (186 per cent increase) yet a humble can of expanding foam has actually decreased by twenty percent. Other mind-boggling examples to emerge from the archives included a typical door hinge down from £42.45 in 1990 to £40.99 today, whilst the price of a stainless steel stink costs exactly the same. In fact, taking 25 of their most popular products, very few had increased to anywhere near the same levels one might have expected compared with many other every day commodities over the same period.
It certainly flies in the face of the commonly held perception amongst many contractors we talk to; that building materials across the board are increasing on an almost weekly basis. So what is going on? Certainly, increased competition, most notably from the Far East, has played a part in keeping prices ultra-competitive. This, together with more efficient manufacturing and distribution procedures, coupled with economies of scale achieved through mergers and takeovers, has kept prices in some areas at least, relatively stagnant.
All of which must be good news for the builder then? He can buy at an extremely competitive price and pass on a healthy mark up to his customer. It would be hard to begrudge such a perk as it is the contractor who carries all the risk and overheads associated with running a small business. And indeed has established favourable trading relationships with his suppliers over a period of time. Well that may have been how it worked in the good old days but it seems that today’s builders can only dream about keeping the cost of materials to themselves.
With the advent of the internet every man and his dog knows the market price of just about everything within seconds of logging on. And with all manner of special deals and loss leaders through the sheds to entice an unsuspecting public it is little wonder that more and more builders are resigned to quoting for labour only work. Not only that, but they are then often required to work with products of a distinctly inferior quality and then deal with customer complaints when the realisation of the project doesn’t live up to expectations.
This increasingly un-level playing field isn’t just confined to tradespersons, of course. Merchants are under increasing pressure from competitive sources, which rely heavily on cherry picking fast moving items. Not for them the inherent costs or aspirations of a highly varied and heavily stocked yard, with high levels of service and technical advice. Ultimately, the artificially low cost of building materials over a sustained period benefits no one, leading to reductions in profit levels, lack of future investment in product development and a fundamental decline in the standards of workmanship across the whole sector. It is a warning which some manufacturers ignore at that peril.
At the end of the day we all crave a deal, but in terms of the future prosperity and well-being of the construction industry we will all pay a significantly higher price by putting cost before quality.
