Financial support for building material costs?

Building materials costs are rocketing due to shortages. Anyone heard of any grants available?

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I have a couple of clients who are sole-trader/ partnership builders/ joiners. They have both been told in the last week that materials costs are going through the roof, in some cases doubling with more large planned increases within a few months. Some materials are also being rationed due to shortages- sand, cement, roof slates, timber, so nothing particularly exotic! One was told by the builder's merchant not to quote as unless he bought the materials immediately, i.e. before the client had even received the quote, the figures on it would be worthless as costs would have gone up again in 6 weeks time and they may not have any supplies left by the time he was ready to start the work. Has anyone heard of any pots of money that can be accessed to cover the costs of these extreme rises? We were wondering if furlough might be an option for the employees if we can't do any work if there's no materials to work with, but this only means jobs get further behind. 

Any advice gratefully received, thanks.

Replies (8)

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blue sheep
By NH
03rd Jun 2021 09:34

Yes I am hearing the same from clients, prices tripling in some cases or just not being be able to get the goods, the start of the fallout? So far pretty much all clients have made more money last year than ever before so my advice is not to get carried away spending those profits, you are going to need them!

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By David Ex
03rd Jun 2021 10:47

Sara Matchett wrote:

Has anyone heard of any pots of money that can be accessed to cover the costs of these extreme rises? We were wondering if furlough might be an option for the employees if we can't do any work if there's no materials to work with, but this only means jobs get further behind. 

Not wanting to seem controversial but, as a tax payer, I’d very much hope that I wasn’t subsidising someone’s extension by contributing to their materials costs. Other factors aside, any government interference with market prices usually causes more problems than it solves, in this case further stoking demand and pushing prices even higher.

Obviously every sympathy for those whose work is affected

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By Hugo Fair
03rd Jun 2021 13:03

Without meaning to sound harsh, your clients are going to have to learn new ways of quoting (as bigger companies always have done).

The proportion of the total quote represented by materials is usually fairly small, so:
* they could simply quote for labour only, with materials 'at cost'; or
* they could do the same, but with an 'indicative budget' for materials (and an extra statement regarding the current state of the market for materials); or
* they could continue to quote for an 'all-in' labour-and-materials price, based on a forecast cost of materials (and make a big thing of how they're shouldering the risk).
Or ... there are lots of other alternatives (some quite adventurous).

Or they could just hope that Rishi finds another magic money tree specially for them ... but I wouldn't give good odds on that having a happy outcome.

BTW furlough is NOT an option for the employees as a response to not being able to work due to a lack of materials. As I'm sure you know, CJRS is restricted to situations driven by covid-19 (not secondary causes or Brexit or anything else).

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Replying to Hugo Fair:
paddle steamer
By DJKL
03rd Jun 2021 13:12

Actually, the repercussions in project funding with banks etc could be significant, you give the funder your cashflows, it agrees to fund, and then as you progress you keep missing targets re percentage completions and drawdown such that the lender starts getting cold feet, or drawdown is not sufficient to keep the project cashflow going.

Given quite often house building only goes cashflow positive during the last 25%-30% of sales materials pricing could be somewhat significant, couple this with a freeze on house prices (and there is some signs up here that the recent price increase days are slowing, especially if you do not have a garden, the new must have) and the industry could well hit some problems.

Whilst developers can have decent margins from planning gains volume housebuilders profit margins can be down at 20%-25% (the big profits often are in the planning gains, our end of the market) , skyrocketing materials is not good news for the industry and that could well filter down to subbies etc if site commencements start to reduce due to pricing uncertainty.

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Replying to DJKL:
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By Hugo Fair
03rd Jun 2021 14:23

I don't disagree with any of your comments regarding volume housebuilders - why would I when it's your area (and I found it informative).
But my response was addressing OP's clients who were described as sole-trader/ partnership builders/ joiners ... and my suggestion that they need to think outside the bog-standard approach (at that end of the market) when quoting.
The scarcity of and uncertainty of prices for materials is certainly not good news, but a bit of evolutionary adaptation can take affected businesses a long way.

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Replying to Hugo Fair:
paddle steamer
By DJKL
03rd Jun 2021 14:51

Even smaller one man bands with subbies build the odd 3-4 house project, I used to have one as a client years ago. ​Close Brothers and similar make good money funding these smaller projects, there also used to be a crowd called Wolsely I think who did similar.(Fees/profit share/interest charged in exchange for funding)

As you say contractual terms will be key. (that is certainly not my forte, we use consultants to oversee the myriad types of standard construction contracts we have over the years used- their interpretation, and construction law itself, being a Dark Art)

From our personal perspective whilst we do have a profit overage in an ongoing 35 house development managed by the other party, that, these days, is my total construction exposure, accordingly I will more likely need to keep an eye on a few of our tenants who are joiners/shopfitters, one has already during Covid had a CVA and not sure any of them have that deep reserves if things get nasty.

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Replying to Hugo Fair:
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By Paul Crowley
03rd Jun 2021 13:22

Agreed
No furlough here.

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By Sara Matchett
04th Jun 2021 09:13

Thanks all, for your thoughts and advice. I agree, the magic money tree has already been shaken pretty hard over the last 12 months!
Will take on board to my clients the idea of quoting slightly differently to try and mitigate the materials costs and will certainly be encouraging them to keep hold of the profits because I do think we may need them.

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