National Buying Group, a purchasing alliance for independent builders’ merchants, is urging its suppliers – manufacturers and importers of building products and materials – not to put up their prices any more than they really have to.
It says that there needs to be ‘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.
While able to accept reasonable cost pressure, it says, National Buying Group (NBG) is increasingly concerned that price rises are not always justified or proportionate, lacking transparent detail to support any changes.
NBG managing director Nick Oates 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.”
For builders’ merchants, passing price increases on to builders becomes harder as they also have the added factor of greatly increased delivery costs on top of any product price change, Nick Oates said.
“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,” he said.
He urged suppliers to the merchant sector to help. “We’re asking suppliers to be reasonable about when they ask for price increases. If a supplier is sitting on many months of stock, there is no need to ask for a price increase today. Secondly, prices need to be more dynamic and reactive to commodity price changes. When commodity prices come down, suppliers need to react as quickly as when they go up. That is only fair.”
He concluded: “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.”