Rates war in plant sector could spell disaster

A rates war over the past three months among plant companies will undoubtedly spell disaster for the sector if it continues for much longer, one of the UK's major players has warned. 

The latest round of rate cutting comes in response to a levelling off in the plant hire market and is said to see even some of the biggest names quoting short term hire rates well below break-even. 

For instance weekly hire rates for a 6t swivel dumper are said to have dropped as low as £90 per week against around £250 per week required for a profitable operation. A 1.5t mini excavator and trailer can be had for £110 per week whereas a 'sensible' rate is £200.

Colin Wood, director and chief executive of the Construction Plant-hire Association, said there is anecdotal evidence that the market is cooling. "Traditionally hire companies cut their rates in an attempt to maintain utilisation," he added.

Hugh Edeleanu, Chairman of H E Services said: "Senior managers within our industry ought to be responsible enough to calculate break-even hire rates and do their utmost to ensure that machines are never put out at below that rate.

"The last thing the plant hire industry needs is for senior managers to take a short term view to try and increase utilisation - it will invariably fail."