The boss of a Tayside construction firm has accused some suppliers of “opportunism” as his costs rise.
Athole McDonald is one of the founding directors of Tayside civil engineering firm Kilmac.
He said the firm has been hit by spiralling material costs, while volatile fuel prices continue to have an impact.
It has seen the firm have to soak-up the rising material prices on some projects.
Mr McDonald said: “We find we are spending a lot of time repricing jobs which have been coming in 10% over budget.
“On a £70 million project you’re not talking about changing the slab type – you’re taking a level off the building.”
He said material prices this year have risen by about 25%, compared to a normal rise of 2 to 3%.
“To be caught amongst massive increases – some at 25% – has given us headaches. There were a couple of significant hits. We just had to soak them up.”
The Kilmac co-founder said rising costs feels like “complete opportunism” from companies.
“There is an annoyance from us, and probably the rest of the world, that there is complete opportunism from manufacturers,” he said.
“I believe there is often no reason for hefty increases in fuel, electricity and oil.”
Impact of rising construction costs
Kilmac has expanded operations towards Aberdeen and Edinburgh in recent years, but remain Tayside-based with with its head office at Dundee Technology Park.
The company is involved in the transformation of Broughty Ferry flood defences as well as the upgrades to Perth City Hall and North Muirton Primary School.
It opened an office near Livingston after multi-million-pound contract wins.
Mr McDonald, who set up Kilmac nearly two decades ago alongside Richard Kilcullen, outlined the impact inflation is having on his business.
He added: “The volatility in material prices means we can’t get onto sites and projects are constantly over budget.
“They’re looking for savings, projects are getting redesigned. You are going round in circles.
“The biggest headache for us has been fuel. The increases are astronomical and these just move through the manufacturers as well.
“I really hope these increases stop, and quickly, because clients are beginning to wonder where they’ll get the money from.”
Kilmac reports turnover up £5.7m
It comes as the firm reports a £5.7m increase in turnover for the year to September 2021.
Its sales jumped from £13.2m in 2020 to £18.9m for the reporting period.
Pre-tax profits also rose to £1.5m, up from £737,000 the year before.
Mr McDonald said the firm, which moved to an employee ownership model earlier this year, managed to keep working through the pandemic.
He also praised staff for their hard work.
He said: “It was a good year for us. Our clients were quite busy so we were busy too.
“A lot of the work we do was classed as essential works so at the start of the pandemic we were only shut for a few weeks.
“The projects we were on went relatively smoothly.
“It has been a far harder road this year.”
