Combat Rising Costs With Risk Management
Even though the construction sector has been experiencing positive growth over the past several months, it still faces a steep challenge—rising material costs. Seventy per cent of SME construction firms experienced a significant increase in material prices in 2016, the steepest rise in prices in more than five years according to the Chartered Institute of Procurement and Supply.
Firms expect an additional 10 to 15 percent increase in material costs as 2017 progresses, according to a recent survey conducted by the Federation of Master Builders. One of the main reasons for increased costs is the depreciation of the pound sterling, as roughly 25 percent of all construction materials are imported.
In addition to rising material costs, construction firms will have to contend with inflation to labour costs brought upon by the industry’s skills gap, which is at nearly a 20-year high, according to the Royal Institution of Chartered Surveyors. To ensure that your firm is able to manage the rising costs of materials and labour, consider implementing these strategies:
- Apply for grants. The Skills and Training fund from the Construction Industry Training Board (CITB) grants up to £5,000 for levy paying firms with fewer than 50 workers. If you are interested in applying, CITB will begin accepting applications on 7th February.
- Develop a comprehensive risk management system. The purpose of a risk management system is to identify potential problems (such as cost inflation and careless health and safety) and develop solutions to adequately address them.