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Utilities firms reel at 40% roadstone rise
00:00 27 Apr 1995
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Angry utilities contractors are struggling to bear the brunt of
roadstone price rises of up to 40% which are biting into slim
profit margins.
The price increase has hit particularly hard because under the new Road and Streetworks Act, fresh stone has to be used to backfill trenches.
The utilities contractors say they are also being hit by increased tipping charges - up by as much as 50% - which are biting because the new rules also mean more material has to be disposed off site.
John Clarke, MD of Alhco, said: 'Material prices have risen out of all proportion - we've had a 40% rise. Suppliers are capitalising on the market. The rises are eating into our profits as we are having to subsidise the extra cost of fill materials.'
R S Kennedy director Barry Linden confirmed the 40% rise in roadstone and said the contractors were also being stung for the extra waste generated by the new act - tipping prices have risen 50% in the south east. 'Profits were already tight - this is pushing them to zero,' he said.
The contractors use the Baxter pricing formula in their contracts which allows fixed price agreements to rise with material prices - but they say that the formula does not apply to roadstone or tipping.
Clarke said: 'Because the cost increases are outside the standard formula the only way to recoup our extra costs is by negotiation.' He said that the clients were sympathetic to the problem.
The price rises have not only hit the utilities contractors. Other firms - particularly those with fixed price contracts - are beginning to suffer.
Tarmac confirmed that price rises were worrying them on fixed price work, while Mowlem purchasing director Armand Elfersy said that materials firms were trying to make big price rises stick.
'We are suffering tremendously on price rises - it's very unfair. Our problem is we have got a job we started three to six months ago with a fixed price that lasts two years and we are faced with a deluge of price increases coming from all directions. The market is not there to take it,' said Elfersy.
But a spokesman for a major roadstone supplier defended the prices: 'There is no connection between the Streetworks Act and recent price increases. Prices have gone up because two-three years of recession meant they were pared right down to the bone.'
The price increase has hit particularly hard because under the new Road and Streetworks Act, fresh stone has to be used to backfill trenches.
The utilities contractors say they are also being hit by increased tipping charges - up by as much as 50% - which are biting because the new rules also mean more material has to be disposed off site.
John Clarke, MD of Alhco, said: 'Material prices have risen out of all proportion - we've had a 40% rise. Suppliers are capitalising on the market. The rises are eating into our profits as we are having to subsidise the extra cost of fill materials.'
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R S Kennedy director Barry Linden confirmed the 40% rise in roadstone and said the contractors were also being stung for the extra waste generated by the new act - tipping prices have risen 50% in the south east. 'Profits were already tight - this is pushing them to zero,' he said.
The contractors use the Baxter pricing formula in their contracts which allows fixed price agreements to rise with material prices - but they say that the formula does not apply to roadstone or tipping.
Clarke said: 'Because the cost increases are outside the standard formula the only way to recoup our extra costs is by negotiation.' He said that the clients were sympathetic to the problem.
The price rises have not only hit the utilities contractors. Other firms - particularly those with fixed price contracts - are beginning to suffer.
Tarmac confirmed that price rises were worrying them on fixed price work, while Mowlem purchasing director Armand Elfersy said that materials firms were trying to make big price rises stick.
'We are suffering tremendously on price rises - it's very unfair. Our problem is we have got a job we started three to six months ago with a fixed price that lasts two years and we are faced with a deluge of price increases coming from all directions. The market is not there to take it,' said Elfersy.
But a spokesman for a major roadstone supplier defended the prices: 'There is no connection between the Streetworks Act and recent price increases. Prices have gone up because two-three years of recession meant they were pared right down to the bone.'
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