This edition of Hot rates examines prices for finishings trades in London, the South-east and East Anglia. Recent press reports have highlighted rate increases for finishing work as projects compete for completion before the millennium. Many finishings trades are relatively labour-intensive, and demand for good-quality artisans has pushed up labour rates.
The rates given are associated with medium-sized building projects in the £500 000-5m value range. The rates relate to Standard Method of Measurement of Building Works items and are representative of schemes with straightforward access.
The rates shown are averages from successful competitively bid tenders received over the past three months. Rates can vary considerably within regions and between projects.
Retail prices index
Analysts have identified a declining trend of retail price inflation since May 1998. The headline rate, in particular, has fallen from 4.2% a year in May 1998 to 1.3% in June 1999.
The retail prices index excluding mortgage interest payments – the index against which the government has set its target of 2.5% inflation – has been considerably steadier over the same period, but fell from 3.2% in May 1998 to 2.2% in July 1999. The rate of increase in the RPIY, which also excludes indirect taxes, has fallen – from 2.5% in May 1998 to 1.5% in July 1999 – and is the reason that some fear that the government's minimum target inflation figure of 1.5% may be breached.
The National Institute of Economic and Social Research has predicted that, with growth accelerating, there is a risk of inflation moving above the Bank of England's 2.5% target, reaching 3.1% by the end of 2000.
The average price in 1998 was the lowest for 25 years. When the barrel price fell below $10 last December, oil prices had fallen by 60% since October 1996. In March 1999, however, prices leaped 40%. The Organisation of Petroleum Exporting Countries then agreed to limit production, in an effort to boost prices further. The agreement seems to be holding and prices have now passed $21 a barrel.
Office for National Statistics figures show that the price of a representative batch of materials fell 1.6% in the past year.
Price adjustment formulae for construction contracts
Price adjustment formulae indices are used to calculate how increased costs affect variation of price contracts. They also provide useful guidance on cost changes in various trades and sectors. The indices are published monthly by the Stationery Office in Price Adjustment Formulae for Construction Contracts: Monthly Bulletin of Indices. They give guidance on the diffential movement of work sections in Spon's Price Books. Of the 60 work categories in the third series, the average cost increase in the past 12 months was 1.6%. The biggest recent influence on the indices has been the June 1999 wage awards, which resulted in the labour:building index rising 8.3% in July. Despite this, 11 of the work categories registered falls in the index in the last 12-month period.
The major cost decreases were in response to metal prices: copper prices fell 39% between June 1997 and March 1999; aluminium prices fell 15% between February 1997 and March 1999. Both industries are beginning to recover, aluminium prices in particular have leaped a spectacular 22% since March. The nadir of the metals market is believed to have passed. The work categories displaying the largest percentage increase are generally those that are the most labour-intensive, such as plastering and painting.
Labour rates: plumbers and heating and ventilating operatives
The Joint Industry Board for Plumbing Mechanical Engineering Services in England and Wales' 1999 pay structure review set new rates applicable from 23 August 1999. Technical plumbers and advanced plumbers are set to receive pay rises of 6.1% and 6.5% respectively, but other grades' percentage rises vary widely.
The Scottish & Northern Ireland Joint Industry Board for the Plumbing Industry agreed a three-part deal in February 1998, bringing in revised wages and allowances from 6 April 1998, 2 November 1998 and 9 August 1999. The rates are applicable from 9 August 1999, representing a rise in basic rates of 6%. Apprentice plumbers and fitters and adult trainees' rates also rose 6% on 9 August 1999.
Plumbers' welding supplements, set at 29p an hour (for possession of a Gas or Arc Certificate) and 58p an hour (for possession of Gas and Arc Certificates) from 6 April 1998, remain unchanged.
Heating and ventilation operatives
The Heating and Ventilating Contractors Association and the Manufacturing Science and Finance Union set a three-year wage agreement for the heating and ventilation contracting industry in October 1997. The third and final part of the agreement came into effect on 23 August 1999. It gives a 7% increase in all hourly wage rates.
The third part of the agreement provides for a further increase in the holiday entitlement to 23 days a year from October 1999.
The build-up of rates for a notional 11-person gang is shown below. The resultant all-in work-hour cost represents an annual increase of 5.2%.