Editor’s Viewpoint: The oncoming storm?

Editor’s Viewpoint: The oncoming storm?

In the Viewpoint column of PBM’s May edition, editor Paul Davies discussed the potential impact of the cost of living crisis on the merchant sector.

As discussed in depth last month, the merchant sector delivered a remarkable recovery from the worst ravages of the pandemic, however a growing cost of living crisis is now seriously threatening the nation’s broader economic bounce back. In April alone, we saw a substantial rise in gas and electricity costs as a consequence of the 54% increase to the price cap, whilst an upswing in National Insurance Contributions for many comes on top of generally higher Council Tax bills.

From the ongoing impact of Covid to unresolved Brexit consequences and the reverberations from the terrible situation in Ukraine, previously existing supply chain difficulties are only being compounded. Indeed, whilst rising utility costs have rightly grabbed the headlines in recent weeks, energy companies and price comparison sites were already pulling deals last September ahead of the previous cap coming into effect.

Similarly, much has been made of escalating fuel prices as a direct consequence of the Russian invasion, but pressure at the pumps has been felt for months. And whilst the cost of the weekly supermarket shop has also been edging upwards for some time, these most recent changes seem to be the straw that obliterated the camel’s back.

“Make no mistake, these are going to be desperately challenging times for vast swathes of the country.”

Such is the magnitude of those energy price rises in particular that the impact is being felt by millions of people who had hitherto considered themselves to be comfortably off, eating into their disposable incomes and forcing them to monitor their expenditure far more stringently.

Inflation is already tracking at 6.2% — the highest it has been in three decades — and the Bank of England says the figure could reach 10% later this year. Reappraised on a six-monthly cycle, the cap is almost certain to go up yet again in October.

Make no mistake, these are going to be desperately challenging times for vast swathes of the country.

And of course, whilst the recent home improvement boom is under threat as consumers now reconsider their discretionary spending, construction sector business operations — and perhaps especially merchant firms — are also impacted by the onslaught of inflationary pressures.

We’d urge you to read the comments of Nick Oates, MD of the National Buying Group, on this subject later in the issue. Acknowledging the burden on suppliers, Nick has called for “realism” in price negotiations. He warned: “There is a real danger that if prices increase too much, we will impact demand from the end consumer, which could ultimately kill the market. We need to spread the inflationary impact across the supply chain.”

The old mantra of closer collaboration is once again vital, and must focus on longer-term efficiencies rather than only on immediate, reactionary responses. And whilst the challenges of the pandemic were somewhat different in nature, perhaps the renewed foundations established since March 2020 will prove advantageous.

To try and spin another positive, the energy cost spike could potentially deliver some opportunities for the sector as homeowners turn to low carbon heating systems or even, more simply, improved insulation to mitigate surging prices. Another ill-considered Green Deal or Green Homes Grant is probably the last thing we need, but an effective Government-backed incentive — such as a bona fide National Retrofit Strategy, as long championed by the likes of the Federation of Master Builders — would be a real boon for the industry and the population at large.

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