Are costs going to rise?

[Triassic]

I read in the paper that costs are likely to rise within twelve months due to the slide in the value of the Pound, with imports costing around 10% more. Thoughts?

[Stones]

Depends on the goods in question.  I can't see the supermarkets raising prices as they are locked in a fairly vicious price war.  Suppliers of other goods may increase prices if they think they can get away with it - what the market will bear.  

[Triassic]

The piece specifically mentioned food and suggested that due to very low margins and every food retailer being in the same boat, they would all have to crease prices.

I was wondering about imported building materials, fixtures and fittings etc.

[Temp]

If you are importing them yourself they have already risen.

I think it's not clear what will happen longer term. If the UK ramps up production of bricks then that may hold prices down forcing imports to compete. It depends if companies like Hanson/Forterra are in the mood to invest in new production capacity here instead of across the channel.

Two weeks ago they said..

http://www.constructionenquirer.com/2016/07/06/brick-giant-plans-to-mothball-two-factories/

"Brick making giant Forterra is planning to mothball two plants in Lancashire."

"“Given current economic uncertainty and sufficient brick inventory levels, the Board has reviewed the current production plan and has decided to maximise the utilisation of our most efficient brick plants and effectively manage our cost base.”

Says imported bricks account for 25% of sales in the UK eg 1 in 4 brick houses is made of imported bricks.

 

 

Edited July 18, 2016 by Temp

[ProDave]

I am just ordering another Rationel window, and it's the same price as it was 10 months ago so no price increase there (yet?)

[Stones]

A lot of businesses will have hedged the price they are paying months ago, or alternatively will be selling based on a pre-determined exchange rate (as opposed to the current and variable exchange rate).  By way of example, read the small print in a holiday brochure and you'll find that their brochure prices are based at a certain rate of exchange.

[Roger440]

14 minutes ago, Stones said:

A lot of businesses will have hedged the price they are paying months ago, or alternatively will be selling based on a pre-determined exchange rate (as opposed to the current and variable exchange rate).  By way of example, read the small print in a holiday brochure and you'll find that their brochure prices are based at a certain rate of exchange.

And some, like us, have a whole heap of stock, bought prior to this.

And if your stock turn is low (like ours) then it will be a while yet before the increased prices filter through.

Watching the exchange rate is now my new hobby! I guessing it wll settle out around 1.38, but that might just be wishful thinking. 

[PeterW]

So I'm seeing pricing coming down if anything - there are some benefits to the big house builders putting the brakes on developments ..!!

I was talking to a supplier who was mentioning the "lack" of aircrete blocks. It's driven by a couple of issues, the key one being fly ash not being available however he said if you ordered 30 pallets on 6 weeks delivery he reckoned they would be delivered on the day. Ask for them tomorrow, and there is a shortage ...!

Most building plastics are driven by oil prices which are at a global low - let's see how long it takes to filter through but I don't expect to be looking far for decent uPVC underground prices.

Most of the high volume / low cost products are reasonably immune to industry downturn - imported sanitary ware and the higher cost / lower volume stuff will show a difference I think sooner rather than later.

Domestic food production will be one to watch as global grain prices for example are all over the place. These have a direct knock on to the poultry / meat producers and the supermarkets tend not to smooth out these prices as much as for other perishables. 

One other impact on food cost is oil - flying in your fresh Kenya beans from Kenya sometimes is cheaper than fueling boilers in glass houses to produce them in the UK - the actual product cost is incidental in a lot of the fresh market as can be seen from supermarket pricing on the staple veg.

Interestingly we now spend around 15% of income on food - down considerably since the 30% of the 1960's - and it's set to drop lower by all expectations.

 

 

 

 

 

[SteamyTea]

I think food prices will rise in the UK if we do really leave the EU trading block.  If farmers think they are going to get the same subsidies that they currently get, then they are seriously deluded.

(that is a personal prediction, not a projection)

[daiking]

1 hour ago, SteamyTea said:

I think food prices will rise in the UK if we do really leave the EU trading block.  If farmers think they are going to get the same subsidies that they currently get, then they are seriously deluded.

(that is a personal prediction, not a projection)

As you seem to be a man who hates the waste of energy, is this not a good thing?

Food production being like an extension of energy usage after all.

[SteamyTea]

Yes, in some ways it is.  We, as a nation, throw away about 30 to 40% of our food.  Raising the price may help.

But the problem, as usual, is that it will hit the poor the most.  As part of my hobby, we share a building with a food bank.  The people that come and claim the free food can arrive in a taxi, or show obvious signs of intoxication.  Most smoke.

So in a way, raising food prices is going to hurt some families, and definitely certain individuals.  Usually the ones where mental health or addictions are a serious problem.  I am not sure what to do about it, maybe raise the price of all alcohol/fags/illegal drugs and use the cash raised to help some people.  Some will not be saved and will probably turn to crime, but it will be small scale and petty crime, nothing like the crime of not paying income/corporation tax.

[Bitpipe]

I recall reading a John Lewis statement that their ex rates were hedged until early / mid 2017 and after that goods priced in USD (such as consumer electronics etc) would start to rise.

We noticed the slow slide in £/€ during the build - We got a good rate (1.45 ish) for the MBC frame (Ireland), Gaulhofer windows (Austria), RK Door (Germany) , MEA basement lightwells (Germany) and Velux (Netherlands). When we came to order the bathrooms from Megabad, it had slid to 1.35. Having said that, we just ordered up a few extras from Megabad and it's still 20-30% cheaper than the UK equivalent pricing, including shipping!

We're halfway through paying for a load of furniture from Denmark so the recent slide has hurt a little but again, still cheaper than buying it from UK furniture stores.

Many of the non standard materials used for building low energy houses (airtightness tapes & membranes, MVHR, passive windows, etc) seem to originate in the EU so that will drive up the price of being more energy efficient. 

[daiking]

7 hours ago, SteamyTea said:

Yes, in some ways it is.  We, as a nation, throw away about 30 to 40% of our food.  Raising the price may help.

But the problem, as usual, is that it will hit the poor the most.  As part of my hobby, we share a building with a food bank.  The people that come and claim the free food can arrive in a taxi, or show obvious signs of intoxication.  Most smoke.

So in a way, raising food prices is going to hurt some families, and definitely certain individuals.  Usually the ones where mental health or addictions are a serious problem.  I am not sure what to do about it, maybe raise the price of all alcohol/fags/illegal drugs and use the cash raised to help some people.  Some will not be saved and will probably turn to crime, but it will be small scale and petty crime, nothing like the crime of not paying income/corporation tax.

I'm surprised by that. I recall you were less sympathetic when it came to fuel poverty. I assumed at the time you were being genuine.

[SteamyTea]

Fuel is ridiculously cheap though.  And, as I showed to Jonti, it was possible to get electricity at the price he said should be the 'subsidised' price he was after with a bit of energy management.

On top of that, at the time, there was a number of schemes to help with improving energy efficiency in homes.  Also it is possible for some people to move to a smaller, better insulated home, it is not possible for people to stop eating (though many could eat better/more appropriately).

So it is not really comparing the same thing at all.

[daiking]

1 hour ago, SteamyTea said:

Fuel is ridiculously cheap though.  And, as I showed to Jonti, it was possible to get electricity at the price he said should be the 'subsidised' price he was after with a bit of energy management.

On top of that, at the time, there was a number of schemes to help with improving energy efficiency in homes.  Also it is possible for some people to move to a smaller, better insulated home, it is not possible for people to stop eating (though many could eat better/more appropriately).

So it is not really comparing the same thing at all.

I see it from the other side. Increasing numbers of people including families forced to rent. No choice on white goods and appliances that use energy and no say in the fabric of the property they live in - and we all know the standard of UK houses. They can't just move to a better place because the market is unlikely to support it whether it be cost or availability in a suitable location. Using a catch all about 'some people' who can move is a lazy generalisation. Similar to the oft used young people prefer to rent as it gives them flexibility. No they don't its just a convenient excuse for their forebears to ignore the problem.

With food, I see that as incredibly cheap and we're clearly doing something wrong with it if you consider the likes of obesity and diabetes. So what its to be done? Is it public information that has reduced the incidence of smoking or the rip your face off taxation?

[ToughButterCup]

19 minutes ago, daiking said:

I see it from the other side. [...]

Is it public information that has reduced the incidence of smoking or the rip your face off taxation?

It's probably both. 

 @Triassic Let's wait for hard data on costs. We won't have to wait long to make meaningful comparisons... Two years maybe. 

And then when we see that, think about benefits at the same time.

[curlewhouse]

Cost will rise even if it's just using Brexit as an excuse. I remember a short time into Gulf War I when I was buying largish amounts of vegetable oil and the price suddenly shot up. The excuse I was given from the company was "oil prices have gone up with it coming from the Gulf" .... I kid you not!