Tender prices appear to be moving up by and so do some labour costs. But these rises may not yet have filtered down to specialists in the building finishes and interior fit out sector.
In recent weeks the construction industry has been enjoying its strongest growth in six and a half years reinforced by a sharp rise in new business orders. Housing activity was the highest in a decade and remains the fastest improving area of construction. This was supported by some expansion in commercial activity away from the south east, confirming a distinctly positive picture across the board.
Backed by positive domestic market conditions, the growth in new work is continuing to drive employment upwards, and has now been increasing for eight consecutive months. It is also pleasing to see that there is growing business confidence, with firms expecting to see more activity in the next few months.
The one area which is beginning to be a concern is the pressure any growth spurt may put on the supply chain to meet a rush in demand. As the industry’s lifeblood, specialists are still recovering from the recession, and until they get back to full capacity, the continued lengthening of delivery times may become a restraining force on the sector in the coming months.
Since the recession began some clients have been taking advantage of the downturn by dumping risk on contractors, screwing them down on price and delaying payments. But now things are on the up could the supply chain hit back?
Most contractors tend to be sensible about prices while they’re filling their order books, but once their target capacity is achieved will we start to see premiums go onto any further jobs?
On the other hand, rather than expand and drive over heads up in a rising market, specialists can start to pick and choose who they work with. Perhaps those who don’t pay their bills will start to find it difficult to secure a preferred contractor?
Managing in a recovery could be as much a challenge as recession. It’s not just winning work but making sure you have the right resources to carry it out. The supply chain is about to fight back.
