The German building trade has come through the pandemic comparatively well so far.
But now many companies are threatened with short-time work and bankruptcy, warns craftsman Hans Peter Wollseifer.
Munich -
Crafts President Hans Peter Wollseifer has warned of the far-reaching consequences for member companies because of the sometimes drastic price increases for building materials.
The development posed "enormous problems" for many construction and expansion trades, said Wollseifer to
Merkur.de.
The President of the Central Association of German Crafts (ZDH) explained that there is “now often a big gap” between the short-term sharp increases in prices and the original price calculation.
“If the companies then have to fulfill the contract without price adjustments, they actually make losses.” In an interview, the ZDH President explains how serious the situation is for many companies and what expectations the industry has of the public sector.
Mr Wollseifer, the prices for building materials such as wood, insulation material and copper have risen dramatically recently. Have you ever experienced such price increases?
In the mid-noughties, there was a similar problem with non-ferrous metals.
But in terms of the breadth of the materials and products involved, I have actually never seen such an exorbitant rise in the price of building materials within such a short period of time in my more than forty years of professional life, that is unique.
What does this mean for the craft businesses in construction?
Above all, this poses enormous problems for the trades, which have survived the pandemic comparatively well and are currently doing well, namely the construction and finishing trades. This puts companies in an extremely awkward position both in terms of price calculation and adherence to deadlines. Because the material is sometimes not available on time, the companies are unable to meet deadlines. And because prices have risen at such short notice, there is now often a big gap between the original price calculation in the offer and the now extremely higher costs when purchasing materials. If companies have to fulfill the contract without an adjustment to the new costs, they actually make losses. In the private sector, there may still be certain possibilities for such renegotiations between the contracting parties.But in the case of public tenders, so-called price escalation clauses must have been agreed in advance and also apply - which is usually not the case.
How bad is the situation now?
It is currently not possible to precisely quantify that.
But the feedback from the companies and also from our chambers and associations show that this development has now become an existential problem for quite a few companies.
In view of a tight equity base, not least because of the pandemic, many companies cannot buffer this.
+
Hans Peter Wollseifer: The trained master painter has been at the head of the Central Association of German Crafts (ZDH) since 2014.
© Boris Trenkel
But can't the handicraft businesses simply pass on the price increases for material to the building owner or client via appropriate clauses?
Indeed, this is possible when such clauses are part of the contract.
But that is hardly the case with existing contracts at the moment.
In addition, in the case of price escalation clauses in public contracts, the contractor must, in principle, also bear its own share of the additional costs.
We are currently examining whether and to what extent price escalation clauses can be used to exacerbate the problem and the public sector, as the client, must open up additional price leeway.
Under no circumstances may it happen that craft businesses that are in default of performance due to current and acute material bottlenecks are additionally subject to contractual sanctions.
What can you do there?
It is certainly worth every attempt to renegotiate with the client.
At this point, I would also like to encourage customers to understand if price adjustments are necessary because of the cost increases that are not their fault.
A client would not have gained anything if the craft business reached its economic limits during the execution of the contract and the construction project remained unfinished.
That would then also be a major risk, not least an economic one, for private builders.
And if the clients do not meet the craftsmen, in the worst case the companies are threatened ...
... Short-time work and bankruptcy, which is downright absurd because the order books are actually well filled.
Some companies with a full order book had to register short-time work because the material simply could not be obtained.
Carpenters report on the first construction sites that are threatened with a construction freeze due to a lack of material.
And unfortunately, against this background, bankruptcies cannot be completely ruled out, which would then affect mostly healthy businesses.
That is a more than absurd situation.
Does the state have to support this?
Should the situation for our companies worsen further, in view of the really very tense situation, export restrictions should be considered, at least on an interim basis. There are also things that can be regulated at short notice. The federal government has just extended logging limits. This may be understandable in terms of nature conservation and the environment, but it completely ignores economic realities. In this exceptional situation, we also expect the contracting authorities to refrain from imposing contractual sanctions on their craft contractors if there are delays in the performance of the contract due to the current crisis situation with construction products.
In the past year, the handicrafts that require approval achieved a total increase in sales of 1.4 percent despite Corona. The development was mainly driven by the strong growth in the construction and finishing trades, where it went up by 6.2 and 4.6 percent respectively. What do you expect for 2021: will it be enough for another plus in construction?
The start of the year in construction was marked by adverse weather conditions, now the construction processes are partially affected by material bottlenecks. In addition, there were massive pull-forward effects into 2020 in order to still benefit from the lower VAT rates. All of this has a negative impact on the sales of the construction companies, which will close with a significantly smaller increase in sales in 2021. Depending on whether the current material bottlenecks will resolve relatively quickly, we are currently expecting an increase in sales of around 2 percent for the main construction trades by the end of the year.
