Middle Man dissatisfaction ?
In the past month or so, we have heard repeated complaints about low overhead 'middle men' such as 'contract hire companies' or rental brokers.
For those who are unfamiliar with the UK crane rental market, there are two ways of renting a crane in the UK. There is standard ‘Crane Hire’, where the customer organises the lift himself, including insurance, lift plan, risk assessments, slinger/signaller, lift manager and the appointed person. The crane owner simply sends out the crane and operator.
If the customer doesn’t have the knowledge or experience to handle the lift themselves however they must take a - ‘Contract Lift‘, in which the crane rental company provides everything – and charges for it. Contract Lifts provide crane rental companies with an opportunity to add value and earn a better return on their assets. However, in recent years an increasing number of individuals with no cranes have set up businesses offering contract lifts. If a person has the required experience and contacts, they can do the job from their living room. All they have to do is sell their services to the end user, hire any additional - usually freelance - specialist and rent a crane in from a rental company, for which they can aggressively shop around.
Some crane rental companies now feel that they are robbing them of the little cream on the top of an increasingly sour carton of milk. The independent contract hirers have few assets or significant overheads and can undercut the traditional rental companies and still make a profit. At the other end of the equation recruiting and retaining crane operators or drivers is becoming increasingly difficult and expensive for the crane companies, thanks to the HGV truck driver shortage in the UK. While fuel costs are set to rise with the impending phasing out of lower taxed red diesel. And that is before you consider the inevitable increases in crane prices.
Now it seems some companies in the access and telehandler rental market feel they are facing a similar issue from ‘brokers’ - in particular small operations or one man bands that typically have no equipment of their own, but who promote keen prices to end users, knowing they can always extract a lower rate from one rental company or another, and making a margin between the two, with no physical role in the transaction.
You can argue that these intermediaries carry the financial risk of not being paid, while having sales and marketing costs to cover. The good ones also can add real value - just like a good insurance broker. The payment risk is real but all too often if they don't get paid, they refuse to pay the supplier. And if something goes wrong with the job, whose name is plastered all over the machine? One thing is for sure, it won’t be the intermediary’s.
Clements Hire owner Jim Longstaff has encapsulated these issues and feelings in a letter he sent us earlier this week. He believes that the UK industry needs to get serious about pricing discipline and strategies. How is it possible that rates can be as low as they were 20 years ago? Why is it that contractors will accept 25, 50 or even 100 percent price increases on steel, wood, cement, etc... and yet refuse to cough up an extra couple of percent for the equipment they use?
Click here to go directly to Longstaff’s letter
and let us know what you think in the comment section below. You can also let us know your position via our online voting poll on the Vertikal homepage.
Have a safe weekend.