ECA NEWS
ROB DRISCOLL, HEAD OF LEGAL AND BUSINESS FOR THE ELECTRICAL CONTRACTORS ASSOCIATION (ECA), EXPLAINS WHY OPEN CONVERSATIONS WITH CLIENTS ABOUT SHARED RISK HAVE
BECOME ESSENTIAL… Tackling hyperinflation head-on
I n May 2022, the Bank of England announced that inflation had surged to 7% – its highest level in thirty years. The Bank raised interest rates, with a warning that we should expect 10% inflation before the end of the year. Meanwhile, British Land also announced in May that it expects tender price inflation to reach 10%. At the same time, Landsec highlighted that its tier one contractors were raising their tender margins by up to 9% on project bids. However, there are many in the electrical and construction sectors who feel that these figures don’t reflect the reality of costing products for construction projects. The latest figures put the inflation rate in the construction industry nearer to 25%, which is tending towards ‘hyperinflation’. Figures from the latest survey of members of the Electrical Distributors’ Association (EDA) point to rising
product costs as one of their top concerns, with price increases compounded by continued shipping delays. The latter has recently become a more severe issue as lockdowns in China continue on top of the squeeze, caused by the invasion of Ukraine by Russia, on the global movement of goods. Competent staffing is also another area of concern for the electrical contracting sector. Although the JIB National Collective Agreement is in place to help stabilise pay rates, this does not reduce the cost-inflation of hiring agency or self- employed electricians. This is something that more projects are doing as the number of qualified personnel in our field is still tightly squeezed. However, even without increasing pay rates, employers are facing added NI and professional indemnity insurance (PII) costs as well as reverse charge VAT which impacts cash flow. For owners
of all sizes of business, this is a time of unparalleled challenge. Because many of our industry’s problems are being felt across the whole economy this, at least, has high level government attention. At a recent meeting of the Confederation of British Industry (CBI), former Chancellor of the Exchequer Rishi Sunak admitted, “The economic situation is extremely serious. A perfect storm of global supply shocks is rolling through our economy simultaneously.” Many ECA Members will be considering what they can do to ride out this wave of hyperinflation. The most important step is to focus on reducing risk. This should begin early, at the bidding stage. If manufacturers and wholesalers are re-fixing prices on a weekly basis, and a contract may be over a period of two-years, then a contractor fixing their rates at or even near today’s prices is
8 | ELECTEX TRADE EVENT DUBLIN • 7-8 SEPT • REGISTER TO ATTEND www-bepex.ie
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