FIS statement on latest wave of price rises and inflation

The past two years have, without doubt, been some of the hardest times businesses in the finishes and interiors sector have faced.  Uncertainty and challenge continues into 2022.  After rapid inflation in 2021 across all material groups, the year started with concerns around the impact of ongoing labour shortages, but in recent weeks the escalation of tragic events in Ukraine have started to put pressure on energy and fuel prices further pressure on the supply chain.  This has resulted in the announcement of further price increases and rapid inflation for key materials.  Of particular concern for FIS members are increases in insulation, steel and plasterboard.

Where this impacts existing contractual relationships members are reminded to check contractual terms and consider the relevance and application of any fluctuation clauses.  If you are unable to rely on standard fluctuation clauses, an early conversation with your client in terms of your ongoing ability to fulfil the contract in the wake of rapid and unexpected price increases is essential.

Where you are currently tendering, consider carefully the impact of the current inflationary environment, look to link any fluctuation to material and product prices rather than general inflation or ensure that quotes are time stamped and limited.  Where you cannot negotiate a shared risk approach with your client, you need to seriously consider what could worse case scenario mean to your business if prices drifted?

We encourage all in the construction sector to consider seriously the impact of imposing fixed prices at this time.  The sector is working on every tighter margins and this could impact the resilience and ongoing viability of of businesses in the supply chain.  Where concerns are raised, a pragmatic, understanding and collaborative approach is essential.  It is vital that we work together to avoid conflict and we further encourage all companies to consider signing and adopting the principles set down in the Conflict Avoidance Pledge that has be developed by the Royal Institute of Chartered Surveyors (RICS) and endorsed by the Construction Leadership Council (CLC).

FIS is providing additional information on the underlying issues that are resulting in ongoing inflationary pressures and additional advice and guidance related to managing businesses and contracts in a high inflation environment.  The aim is to keep it refreshed so businesses in the sector have a clear picture and can have informed decisions up and down the supply chain (last updated 31st March 2022).

Further information, advice and guidance is provided by FIS here.