Materials Price Rises and Supply Shortages Make Contractor Pull Out of Project

NORTH WALES based roofing contractor Greenough & Sons Roofing Contractors Ltd disclosed last week that the company had pulled out of a scheduled project because of material price rises and supply shortages.

Director, Jon Greenough explained that the price for a local authority housing association project had been agreed more than 12 months ago, with the contract being signed on 7 July 2020. After the job’s start date of November 2020 was put back, Greenough continually warned the Main Contractor that materials costs were escalating and an increase was inevitable with any further delays.

When the contract was finally due to start in July 2021, approximately 8 months late, the main contractor was unwilling to discuss any increases on the original quote. Greenough had suggested just a 3% increase to go some way towards the huge increases in materials cost since the contract was awarded in 2020. He explained to the main contractor regularly, in the lead up to the job starting, that costs were surging at unprecedented levels, including 100% rise on battens, 50% rises on nails, 20% on slate and 15% on roofing underlay.

Massive Price Rises Faced

The proposed 3% cost rise on the contract, was rejected as the main contractor refused to negotiate, forcing Greenough’s to pull out of the work.

Jon Greenough

Jon Greenough comments. “I thought a 3% rise was very reasonable considering the massive price rises we’re facing on materials.”

Even with a 3% increase on the cost of the contracted work, Greenough & Sons would have struggled to make any profit. “The only saving grace on the job was that it was fairly straightforward with large simple areas and not many complications, so we could have completed over 1,000m² of slate roofs in about 4 weeks. It would have been turnover rather than profit, but just as importantly, keeping local people safely employed.”

Now Jon Greenough says he wants to draw attention to the impact of the price rises and shortages on roofing contractors. He says, “Everyone’s talking about the rising prices of materials but nobody’s really talking about the effect that is actually having on the ground and I thought somebody needed to.”

“Many roofing contractors are in framework contracts for two, three, four years or more. Normally they have allowed for, and can absorb ‘normal’ increases. But when you’re talking about 50% increases and 100% increases on materials, this is previously unheard of and it’s not something contractors can absorb.”

Roofing materials – and construction materials across the board – have been in increasingly short supply since the autumn of 2020. Since then, prices have steadily increased while delivery times from orders have lengthened.

Quality Standards Warning

If local authority housing associations don’t accept some of the burden of the price rises, Jon is concerned that they will be left without any reputable roofing contractors to do the work.

“I thought this case should be highlighted because unless local authorities and government funded projects are willing to get realistic and compromise, they are going to end up with cut-price roofers on these roofs rather than bona fide contractors. They are not going to get the right quality or service that this type of work demands.”

Greenough & Sons biggest forthcoming project is re-roofing of Phase 1 of Manchester Town Hall.

“We’ve had to have the conversation with our client in Manchester about the materials crisis and the possibility of securing materials well before we start in November, not only to make sure we physically have them available, but to avoid any further price hikes that seem set to continue this year,” explains Jon.

“To be fair Manchester City Council have been very understanding of the situation and have reached sensible compromises with contractors on a goodwill basis to ensure continuity.

“Let’s just hope that other clients and main contractors can follow their example before it’s too late and important projects are left without properly qualified roofing contractors.”

Information For Planning

For Jon, as for many other roofing contractors, information about availability and prices rises is key to planning ahead. But the information from merchants or manufacturers has been too vague to plan properly.

“We deal with various big merchants and all we’re hearing is ‘we just don’t know’. We have been told the prices will go up on the first of the month, month after month. We are being told to expect 15-30% increases on many materials, and not to expect them to come down again.

“We are taking the problem to our clients – local authorities and main contractors – but generally they’re not having any of it. The common response is to just say ‘well this is the contracted price’.

“So what companies like us will tend to do now is pull out of such projects and target domestic, private work, rather than remain in local authority work where it’s just not realistic at the moment,” says Jon.

Although Jon admits the same problems are faced when carrying out domestic work, he says they are not so acute. It is easier to negotiate with domestic clients, who are often more flexible, and the work is shorter term so contractors only need to price a few weeks ahead. They also pay faster so there is a tighter turnaround on cashflow.

“So now we’re bringing forward domestic work that was planned further down the pipeline, explaining that there is now a window of opportunity to do their jobs sooner rather than later because we’re putting off jobs where large clients are unwilling to negotiate. This is very positive news for domestic customers at the moment who perhaps want to spend money on a new roof rather than going on holiday abroad.”

Now, contractors are hoping that industry representative bodies such as trade associations and other organisations will work to explain the situation to main contractors and big clients such as housebuilders. They hope that these clients will accept the reality of the materials shortages and cost increases that are happening, not just in construction, but across the economy.

Without some willingness to negotiate and compromise the fear is that work will be given to substandard firms carrying out deficient work or will be halted entirely, creating a downward turn for the economy.

>> Read more about the materials crisis in the news