As a client, you may have noticed that the project cost has kept shifting upward ever since you planned on fencing your structure. Who is to blame? Definitely not the contractor. The shift can only be attributed to rising material costs.

Everyone on the construction chain gets adversely affected by a rise in the cost of building materials. But, how are fencing contractors affected? Let’s find out.

Effects of Inflation on Fencing Contractors

Here are the glaring effects of inflation:

1. Reduced Contracts

As the prices soar, most potential clients consider postponing the projects hoping that the prices will come down in the future.

Business opportunities are not as forthcoming as to when the material costs are relatively affordable.

2. Project Price Escalation

A rise in fencing materials costs such as color bond steel will lead to the cost being passed on to the clients. As much as the contractor needs the business, it’s impossible to bear the rise in cost alone.

Once the material cost hits the ceiling that the contractor had allowed, it becomes impossible to continue with the project while operating at a loss.

If they fail to agree on the adjustment with the client, the project will be abandoned, which may hurt the reputation of the contractor.

3. Reduced Margins

As a fencing contractor, a rise in material costs lowers your project's profit margins.

Your expected return on investments will be adversely affected as a contractor before the client agrees to review the contract price to match the prevailing material costs.

4. Reduced Purchasing Power

A rise in fencing materials costs indicates inflation in the economy, which affects the purchasing power of the citizens.

Potential clients postpone fencing projects and delay construction plans hoping that things will get back to normal.

The high costs lead to few projects covered within a financial year. This will, in turn, affect the normal functioning of the fencing firms with the possibility of layoffs as they downsize.

5. Reviewed Contracts

Material price escalation leads to clients reviewing the details of the contract settling only on basic fencing and eliminating aesthetics that the fencing can do without.

Reviewed contracts mean less revenue coming in for the contractors. For instance, a client who had accepted a fencing project using color bond steel that's finished with aesthetics giving it a beautiful appeal, retracts and settles for the basic.

Reduced detailing translates to minimal workmanship and less revenue for the contractor.

Conclusion

An increase in material cost will impact the fencing contractors in different ways, from lowering the clients' purchasing power to reduced earnings on ongoing projects. On the other hand, it can be a blessing when the prices of the materials rise when you have already bought in lump sum at a lower cost.

When signing the contract, every contractor needs to include the material cost escalation clause. It cushions you from the adverse effects of the rapid rise in material costs. The clause also helps you work within the permissible limits and avoid legal issues when forced to abandon a project halfway that proves not viable.