To be hit with a steel price rise from $90 per tonne to $312 in one year is bad enough. To then be further hit with a 16% fall in the Pound against the Euro and Dollar drives home a miserable price increase for the scaffolding sector. Clearly there is a direct correlation between the price of steel – coupled with exchange rates – and what the end use price of scaffolding poles are in the UK.
These price rises are now finding their way through to the consumer with three of the UK’s major suppliers reporting price rises. Without quoting any names:
“Our prices are going up on the 1st April this year”
“We have increased our price by the retail price index”
“We have no option but to pass on some of the price increase to our scaffolding customer base”
For one leading company, they are quoted as saying “We are holding our hire prices for the whole of 2017.” They do not mention the price of tubes for sale…
From what we can see, UK suppliers of scaffolding kit are shouldering some of the price rises coming out of China and other countries that supply the UK. Clearly this is helping the end user, scaffolding erectors, to some extent. But how long can they maintain this is another question? These UK suppliers also need to make a profit, so ultimately, there may well be further price increases.
So what is the answer to the scaffolding company owner, suffering from an increase in the price of their kit, petrol and diesel 15% to 20% more expensive than a year ago and employees asking for a pay increase to manage their own lives with the problems of increasing inflation?
There is an answer, and that is to lease the equipment.
None of us can get away from the price increase, but let’s take an example where the equipment was £10,000.00+VAT a year ago, but costs £11,000.00+VAT now. Previously, the lease rental on this would have been circa £350.00+VAT per month over three years, with the £1,000.00 price rise this would now be £385.00+VAT per month. An extra £35.00+VAT per month, or just over £1.00 per day.
Buying the equipment now on a lease locks you into the new cost (of £11,000.00), but also protects you from any further price rises. Hence, if the price of steel goes up again and you are paying £12,000.00 later in the year, you are saving money. From a cash flow perspective, you are much better off.
So rather than put off that purchase of poles and other kit due to the prices rises, now may be the best time to make the investment and manage the cash flow implications by leasing the scaffolding equipment.
Written by Carl Redding.