Inflation’s impact on economic activity has been singled out by a construction industry boss who yesterday raised the prospect that “one or two” projects might not go ahead because of increasing costs.
Scott Brown, managing director of Perth-based mini-conglomerate I&H Brown, said his family-owned business will “obviously” have to pass on higher costs to clients ranging across the engineering, energy, property development and plant hire sectors. While the firm’s workload is “profitable and progressing satisfactorily”, reporting and cost control “remain essential”.
“A lot of increases have started at between 5 and 15 per cent, and we’re seeing for instance gas oil, which is the fuel that the earth moving machinery uses, has gone from 66p per litre up to currently £1.05.” Mr Brown said.
“That has been affected obviously by the Ukraine crisis, so that may come back depending on what happens in the coming months, but generally speaking increases of between 5% and 15% would be a reasonable estimate.”
He added: “It will be interesting to see whether it may have some effect on clients’ decision-making on the viability of projects.
"We think in the renewable sector, these projects will still go ahead because it’s a fairly healthy sector at the present time, but there may be one or two projects where these price increases feed through and perhaps put the brakes on one or two projects that might have otherwise come to fruition.”
I&H Brown, which generates about a quarter of its revenues from projects in the renewables sector, saw turnover rise by 63% to £79.9 million during the year to August 29 as the economy continued to emerge from lockdown restrictions. The company posted a pre-tax profit of £3.1m, up from £1.9m, which it described as “reasonable” given continued additional Covid-related costs.
Mr Brown said the business, which has more than 200 direct employees, benefitted to an extent from a rebound in activity following the lockdown restrictions of 2020. Workloads were “pretty much the same as usual” in the field of renewables, where I&H Brown is nearing completion on the Neart na Gaoithe (NNG) offshore windfarm for GE and recently secured new business from SSE and ScottishPower.
READ MORE: Perth civils specialist I&H Brown predicts profits are set to double
He added that the group expects to remain profitable in the current year, though turnover will fall slightly as revenues "naturally fluctuate".
“We have seen a general upturn in work, but that had already begun around about the time of the three-month lockdown period that we saw in Scotland two years ago.” Mr Brown said. “We were already experiencing an upturn, albeit we then had to stop, but our order book was there and we knew at that time we were going back to a reasonable amount of work.”
In the current financial year, I&H Brown has completed the sale of a further parcel of land at its site in North Dunfermline to Persimmon Homes.
The group, which has its roots in agriculture, has owned the site at North Dunfermline for about three decades as part of its historic farm landholdings.
READ MORE: Perth civils specialist predicts higher profitability despite lockdown losses
The main area is expected to accommodate up to 1,100 new homes, less than 300 of which have been built so far. Discussions are continuing with Fife Council about funding for a new primary school that will allow further parcels of land to be released for development.
Two additional areas have scope for at least 400 further homes. Elsewhere, Mr Brown said the development division continues towards site progress on a number of other landholdings.
I&H Brown said it is working towards net zero targets and is investing in green projects that will allow the company to offset its carbon emissions. It is also working “where possible” towards net zero without offsetting and is trialling HVO (hydrogenated vegetables oil) fuel in its plant and machinery as an alternative to fossil fuels.
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