The impact of inflation across the construction supply chain fuelled by energy increases has led one of the UK’s largest buying groups to call for “realism” in pricing negotiations.
The Office for Budget Responsibility (OBR) is forecasting an inflation peak of 9% this year which is driving material costs up along the length of the construction supply chain.
Whilst able to accept reasonable cost pressure, National Buying Group (NBG) said it was increasingly concerned that price changes must be justified and proportionate.
Nick Oates, managing director at National Buying Group, said: “We understand this is a very challenging market and that is being reflected in our negotiations. However, there is a real danger that if prices increase too much, we will impact demand from the end consumer, which could ultimately kill the market. We need to spread the inflationary impact across the supply chain.
“Merchants are arguably the most vulnerable portion of the supply chain to this ‘double squeeze’ from both material and fuel pricing. In effect, merchants must find an extra circa 5% on top of the increase in material prices to cover the cost of delivery.
“NBG and its Partners have always prided themselves on building strong relationships with their suppliers. We understand that suppliers cannot absorb all the increase in cost and a proportion needs to be passed on, but independent merchants are also being impacted and their margins eroded by the cost of delivery, so we must take a longer-term balanced view.”