Price inflation: how clients and contractors can work together

Paul Cossell is chair of Build UK 

As an industry, we are currently facing inflationary pressures not seen in the UK for 40 years. The latest update from CLC Product Availability Group confirms that the average inflation for products and materials this year has been about 23 per cent. Further increases are expected, particularly for energy-intensive products.

We know that cost escalation, closely followed by a lack of skilled labour and material shortages, is now the key issue for businesses across the supply chain. As it did during COVID-19, Build UK is bringing its members together to co-ordinate a collective response.

With the support of Wedlake Bell LLP, we have published comprehensive guidance on managing price inflation, which includes advice on areas such as:

  • Fluctuation clauses;
  • Negotiating new and existing contracts to take inflation into account; and
  • How to mitigate the impact of price rises on projects.

Most forms of contract have standard provisions for sharing the risks associated with price volatility, which should be used appropriately and fairly, and in a spirit of collaboration. With businesses across the industry under pressure, we all need to play our part.

We often talk about the better industry we want to see, where risk is allocated fairly and projects are delivered more efficiently. How each of us responds to the current challenges will determine how quickly we can realise this vision.

“We often talk about the better industry we want to see, where risk is allocated fairly and projects are delivered more efficiently”

An enduring commitment to prompt payment must remain a priority, and a number of Build UK client and contractor members are reducing their payment terms to support the cashflow of their suppliers.

The Welsh government has provided advice to its public-sector bodies on how to manage the unprecedented pressures on materials, and Build UK will be meeting with key government departments to discuss a collaborative approach to managing inflation to the benefit of all parties.

We learned the value of collaboration during the pandemic and showed that we perform better as an industry when we work together. Where businesses, programmes or projects are struggling due to materials shortages and price inflation, we need to discuss the issues openly, and find creative and innovative ways to mitigate these risks in the interest of our clients and the supply chain.

I firmly believe that by doing the right thing over the coming weeks and months, we can achieve our shared ambition of being a productive and profitable sector.

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