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Plumbers and Heating Engineers are over COVID, busy and optimistic, but inflation may be about to threaten their lifestyle.

The 16th Williams “State of the Trade Survey” finds that despite strong trading, robust order books and little pressure to discount, the rising cost of living might cancel out the gains made in the years leading up to the pandemic.

Since 2003, we have been gathering both hard data about prices, discounting habits and order books, and comparing it with market sentiment indicators which give a flavour of how tradespeople and firms are viewing the marketplace and the future.

We were unable to run the survey in 2020 due to the COVID-19 pandemic but returned to gathering data in 2021. Please note that the data referenced in this article was gathered before the Russian invasion of Ukraine, and before boiler shortages had a major impact on the market.

Looking first at the headline labour rates for general plumbing work and for gas work, the stand-out fact is that the median rate has not changed since 2019. This is the first time we have seen a 3 year “freeze” in the median rate in both categories since we started to collect data.

However, it does seem that “the rich get richer” as the top decile continue to enjoy substantial growth, with the most expensive 10% of gas engineers adding an extra £10 per hour compared to 2019. Whilst the bottom decile and bottom quartile of general plumbers are also getting better rates, the same does not apply to the lower rates for gas work. Whilst the oft-quoted “race to the bottom” is not (and never has been) supported by the data, it would be fair to say that there are a significant number of gas engineers whose pricing is “stuck in a rut”.

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Inflation

With inflation very much in the news at the time of writing, we thought it might be interesting to compare our benchmark median hourly plumbing rate against inflation over a long time period. The graph below shows that benchmark rate against the official inflation rate (CPI) from the Bank of England, and clearly shows that hourly rates have risen significantly faster than inflation.

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Although the upward tick in inflation is visible at the far right end of the graph, this suggests that the purchasing power (and therefore lifestyle) of plumbers has improved markedly over the last decade. This feels slightly at odds with the general mood that we hear on the trade counter and on social media, so we thought we would investigate using a couple of other comparators. We chose the price of diesel (one of the key variable costs for a trade business) and the average price of a house in the UK, since this is the highest value purchase that most of us ever make.

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Looking at fuel prices, labour rates steadily improved in terms of the litres of diesel they would buy, right up until 2020. However, recent sky-rocketing pump prices have wiped out in a few months most of what was gained over the previous decade, so unless labour rates improve sharply in 2022, then an hour of plumbing this year may pay for no more diesel than it did back in 2013.

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Unlike fuel, labour rates and house prices rose in almost perfect harmony from 2011 to 2017. For a couple of years from 2018 to 2019, with labour rates increasing and house prices fairly static, the former started to pull away from the latter. However since 2019, the boot has been on the other foot. Labour rates have hardly moved, so the recent increase in property prices has tilted the balance in the other direction.

Discounting

Of course, the rate quoted is not always the rate achieved. In the aftermath of the 2008 crash, discounting rates to maintain the flow of work became commonplace. As late as 2012, two thirds of respondents admitted to discounting prices at least some of the time, with nearly half of those using discounting as a frequent tactic.

By 2018, this was a declining trend, with over two thirds saying that they never discounted and only a few of those that did were resorting to this tactic regularly.

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By 2021, pressure to discount had all but disappeared, with confident tradespeople sticking to their price 84% of the time.

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One might think that there would be a correlation between overall prices charged and the need to discount. Perhaps the firm quoting figures in the top decile might have to discount their hefty charges more often than those charging more modest rates?

Perhaps counter-intuitively, the reverse turns out to be the case. Those charging less than £40 per hour are more likely to discount (18%) than the average of all respondents (16%), whereas only 9% of those charging £75/hr or more report finding this necessary.

Business Confidence & Order Books

(Reminder – this survey was carried out before the Russian invasion of Ukraine and before the full impact of boiler shortages was felt).

Asked about the previous 12 months, 4/5th of respondents felt it had been good or very good, with a vanishingly small proportion describing it as poor or very poor.

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Asked about the outlook for the next 12 months, few were pessimistic.

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One of the key drivers of confidence is how full the diary is, and it seems that order books are reasonably strong by historic standards. Whilst there have been no big shifts in the responses to this question, in 2021 compared to 2019 and 2018 we had the lowest number of people reporting bookings of 2 weeks or less, and the highest number reporting 3 months or more.

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Geographical variation

Over the 16 years of collecting and studying this data, the only conclusions about the impact of geography on pricing that we can find is that expensive plumbers (top decile) are more likely to be found inside, or just a few miles outside of the M25 and are only rarely in rural areas, such as West Wales, the West Country or the Lake District.

On the other hand, the distribution of cheap plumbers (bottom decile) is fairly random once outside the M25. You have as much chance of finding someone charging £30 or less in rural Kent as you have in the post-industrial provincial cities.

Other than the M25 effect, there is little evidence of a North/South divide with rates in Southampton similar to Sheffield, and Bristol much the same as Bolton.

Local Market Awareness

Another factor which we have reported on before is the lack of a thorough understanding of local competitors’ prices. Every year we ask respondents whether they think that they are cheap, average or expensive compared to other tradespeople in their area. This year 78% of people described themselves as being “average”. Yet when we look at the data at postcode level, we see a different story. In one recent survey, we had 17 respondents who happened to live in the same postcode area. They were similar size and engaged in similar work. Rates ranged from £20/hr to £75/hr with a wide spread in between. Every single one of them believed that their rates were “average” for that area.

Outlook for Pricing.

Asked if they intended to raise rates in 2022, there was a surprising reticence amongst a significant proportion of the respondents. Whilst only a tiny handful expect rates to fall, and most people anticipate some increase, over a third are planning to leave rates as they are, some for the 4th year running.

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Even if we filter the results to find the group which might be expected to be the most bullish, those describing the last year as very good, who claim never to discount and have more than 8 weeks work booked in, the most common answer to the pricing question was still “remain the same” and relatively few planned more than a small increase.

It begs the question – if these businesses don’t feel the time is right to raise prices when their own cost of living is skyrocketing, when they have just had a great year, when they are under no pressure to discount their current rate and when they have plenty of work booked in…

…if not now, then when?

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Williams State of the Trade Survey 2021