Cost inflation and cashflow issues causing headaches for contractors

Cost inflation and cashflow issues causing headaches for contractors

19th May 2022 | Hudson Contract

Every working day of the year, Hudson Contract's team of regional account managers are out and about meeting clients and visiting sites across the country.

With more than 2,500 active clients and operative numbers now passing pre-Covid levels to nearing 40,000 on site at any one time, there are plenty to go at. We pride ourselves on having a greater level of industry engagement than any other organisation, and we regularly go beyond dealing with tax and employment law to help represent our clients on all matters of taxation and legislation.

Dan Davies, compliance manager and regional manager for the North West, said: “Companies are generally very busy but many are nervous about potential cash-flow issues and inflation. Some say they are being clobbered from all angles – rising fuel costs, material price increases, the domestic reverse charge of VAT, the rising cost of labour and delayed payments from major contractors and developers.

“Some of the issues are not new and are driven by well-documented issues around the globe, but VAT changes and scrapping the red diesel rebate are homegrown policy decisions made by what is supposed to be a business-friendly Conservative government.

"The domestic reverse charge has crippled cashflows and banning red diesel is in effect introducing a huge green tax at the worst possible moment.

“On top of that, the indirect costs of making fuel more expensive are increased levels of fuel theft which pushes contractors to bring in additional costly security measures. If you store fuel on site or have a big machine potentially holding a lot of fuel, it becomes a target. Some criminals will even damage plant, rupturing fuel tanks to get at the fuel.

“Cost inflation has to land somewhere and there is only so much that contractors, developers and subcontractors can shoulder before increases are passed on to consumers. If something doesn’t give, house prices will rise even further and government budgets will be stretched. Hopefully we won’t get to the point of housing and infrastructure projects being scrapped and the industry slowing down.”

Hudson Contract’s five regional managers visit an average of 80 construction firms every week and are fully in touch with the concerns of SME owner-managers across England and Wales.

The message to government is clear: "enough is enough, construction is a key driver of the economy but there is only so much you can draw out of it before you drive it into reverse."

Dan added: “We are here to support our clients and we have a choice of models to suit different cash-flow profiles and considerations. If companies wish to discuss their situation, we would encourage them to pick up the phone and call us – we will always help where we can.”

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