Collapsing construction workloads push plant hire prices down to nine-year low

Posted by Brian Green

28 November 2012

From Brickonomics

The worrying state of the construction industry is becoming increasingly evident outside those figures that show sharp falls in output, continuously weak orders and job losses.

The latest Services Producer Price Indicies makes for very gloomy reading for the plant hire industry.

It shows a fall in prices of 5.3% in the third quarter of this year compared with the same period a year ago.

Admittedly autumn last year was a peak, but as the graph shows there has been a slide in prices since then. And they have sunk to the lowest level for nine years according to the Office for National Statistics measure.

Most plant hire firms will have trimmed their inventories to match the market. And this combined with an improvement in workloads saw prices recover last year, providing some good news.

But steadily worsening construction activity and a darkening outlook appear to have pressured many hire firms into once again accepting lower prices.

The picture at this stage is likely to be mixed with some firms managing to hold rates. But with the industry shrinking at the rate of 1% a month, demand for plant will be falling sharply.

Those who fear seeing their kit left on the shelf or in the yard will be keen to get it out on hire at least earning something.

Plant hire firms now face the ugly job of deciding how to readjust to a second sharp drop in demand and how aggressive to be in cutting capacity.

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