Wednesday, March 08, 2017
Despite positive economic data, the weak pound could pose challenges for
Despite concerns about the potential impact of the EU referendum on Gross Domestic Product (GDP), the economy grew by 2% last year [SC2], giving the construction, manufacturing and services industries cause to be optimistic.
But while consumer confidence seems to have held up since the June 23 Brexit vote, it’s not all been plain sailing, with
Pound tumbles against major currencies
In the short term at least, official GDP figures suggest the ‘leave’ vote has done little to damage the
After surging on the eve of the referendum, when opinion polls suggested a ‘remain’ victory was on the cards [SC4],
For some companies, this trend may prove positive. Research from the CBI suggests manufacturing exports have become more competitive on the back of
But the weak pound appears to be a double-edged sword, with other studies warning about its impact on business costs.
For tradespeople focusing on domestic rather than international markets, the continued weakness of
Research from IHS Markit and the Chartered Institute of Procurement and Supply shows construction firms faced their largest rise in costs since 2008 during January [SC8].
And other recent data from the Federation of Master Builders (FMB) suggests 70% of the country’s smaller building firms have now seen material prices rise because of the falling pound. A wide range of trades have been affected, with prices increasing on everything from timber through to Spanish slate [SC9].
Highlighting the scale of the problem, FMB director of external affairs Sarah McMonagle said: “A quarter of all materials used by the
Understanding the impact of rising costs
Higher material costs could eat into the profit margins of construction firms – something which may be particularly difficult for tradespeople running small businesses.
And there might be wider implications too, including:
Problems pricing jobs accurately. Since material costs have the potential to go up halfway through a job, accurately charging clients is becoming a trickier process. To cover themselves against sudden increases, tradespeople might be forced to set aside larger contingency funds.
Higher costs for clients. Construction firms may need to set higher charges for their household customers and business clients, in response to fluctuating material expenses.
Less choice for customers. If certain materials become overly expensive, building firms and their customers might have to adapt accordingly and rethink the designs of their projects.
Protecting your business interests
At a time when
Instead, reviewing your budget, cutting unnecessary spending, and seeking the best deals on things like energy and transport could all help to mitigate higher material expenses.
The desire to find the best deal for your business should extend to your search for an insurance policy. Affordability is one factor to consider; however, and perhaps more importantly, you must consider whether a policy offers adequate cover for your businesses assets.
Underinsurance of increasingly expensive business critical materials could cause unsustainable economic losses in the event of a claim.
As such it has never been more important for business owners to take a proactive approach when it comes to reviewing their sums insured; thereby making sure their cover is adequate.
Having an insurance policy in place which offers the correct level of cover for your business is a simple way to avoid further, and sometimes critical, business expense.
NIG offers a range of products to suit the insurance requirements of a wide variety of businesses.
From our Tradesman eProduct, designed for businesses with a turnover of up to £1,000,000, through to our regionally-traded Contractors Combined Product, designed for businesses with a turnover of up to £10,000,000 (larger quality risks always considered); we have the capability to provide adequate cover for your business.