Over the recent bank holiday, I was sitting with a few friends when the inevitable question came up: “How’s business?”

We talked for a while about the state of trade, the economy, and how different industries have coped over the last few years. Eventually, the conversation turned to Covid and the lasting effect it has had on businesses.

Then one friend asked: “How did you cope with all the surcharges?”, and that simple question opened up a whole can of worms.

Let’s rewind to 2019. Life was good. Businesses were trading strongly and, generally speaking, most sectors within the KBB industry were performing well. Manufacturers, retailers, installers and suppliers all understood the rules of the game.

There would typically be one price increase each year. It might arrive in January, April or July, but it was predictable. Brochures were printed, price books were issued, and everyone knew where they stood. You could confidently quote a bathroom, kitchen or bedroom project knowing that the materials would cost the same when you came to place the order.

Then 2020 arrived, and Covid changed everything. It’s fair to say that none of us fully understood the scale of the disruption that was about to unfold. Within weeks of lockdown, suppliers and manufacturers started issuing price increase notices and changing trading terms.

First came fuel surcharges of 3-5%. Then container shipping costs exploded. Containers that had cost around $1,500 suddenly reached nearly $20,000. Every product arriving by sea became more expensive overnight.

Then the emails started – you know the ones, they all began with the phrase: “with a heavy heart…”. In fact, the phrase became almost a running joke. Yet behind every email was another increase. Before long, we were paying around 10% more for exactly the same products.

Then came the Ever Given incident in the Suez Canal. Even though only one ship got stuck, the whole global supply chain begun to panic. And then, of course, prices rise once again…

Rollercoaster market

During and immediately after Covid, the KBB sector experienced a surge in demand. 

People were spending money on their homes rather than holidays. Sales of kitchens, bathrooms and bedrooms increased dramatically, and for a brief period, business felt buoyant. But when the dust settled, the only thing that truly remained was a new, permanently higher price level.

By late 2021, everyone was feeling the effects, but just as normality started to return, February 2022 brought another major shock: Russia invaded Ukraine.

For our industry, this was arguably the biggest disruption yet. Fuel prices surged. Raw materials became harder to source. Transportation costs increased. Manufacturing costs increased. Operational costs increased. And of course, more surcharges arrived.

In fact, another 10-15% increase in costs became almost commonplace. The days of annual price rises disappeared completely.

It seemed that manufacturers stopped printing price books because they were often out of date before they reached the showroom floor.

Then price increases became twice-yearly, or even three times yearly. And sometimes with additional surchases in between those. The knock-on effect was severe. Consumer confidence dropped, large commercial projects stalled, and homeowners postponed major renovations.

The market softened, and many sectors have been fighting declining demand ever since. By my calculations, the cumulative effect of these events has added around 20% or more to industry pricing since 2020. Some increases were understandable, but some were unavoidable. Many became accepted as simply part of modern trading.

Then, just as confidence began to return, inflation eased and interest rates started falling, another global conflict emerged.

History repeats

The conflict between the US and Iran kicked off in February of this year, and once again, the emails started arriving: “With a heavy heart…”.

Within a matter of days, one supplier announced a 10% “Act of War Surcharge.” I had to read it twice. What exactly is an Act of War Surcharge? And how can anyone accurately calculate the impact of a conflict within a matter of days? Surely the true costs had not yet materialised? 

Yet the opportunity to increase prices was immediate. Fuel prices jumped, transport costs rose, raw material costs rose, and soon enough, further supplier increases of 3-5% followed.

To be clear, most of us understand why costs increase when fuel, logistics and materials become more expensive. That’s not the real issue. The real question is: can anyone remember a supplier reducing prices?

Container costs are now close to pre-Covid levels. Many of the supply chain issues that triggered emergency increases have long since been resolved. Fuel prices fluctuate. Shipping routes reopen. And global bottlenecks ease.

Yet the prices of the products we buy rarely move in the opposite direction. The surcharges remain. The increases remain. And The new baseline simply becomes accepted. And while much has been written about the value of supplier surcharges, very little attention has been paid to the hidden cost borne by retailers.

Every surcharge had to be identified, communicated, entered into pricing software, checked by designers, and reflected in quotations. Delays in updates often meant products were sold using outdated costs, eroding margins long before the retailer realised it.

Many business owners could tell you what surcharge they were charged, but few could accurately calculate the profit lost through pricing delays, absorbed increases, administrative time, or quoting errors. The disparity between known costs and hidden costs is significant.

An interesting question remains: how much profit did retailers actually lose during and after each major world event that triggered these surcharges? For most businesses, the answer is probably impossible to calculate. The true impact was not just the surcharge itself, but the silent margin erosion that followed.

Permanent problem?

We all understand annual price increases, and we’ve even accepted twice-yearly increases. Most of us have reluctantly accepted temporary surcharges and extraordinary circumstance price hikes. But when do temporary increases stop being temporary?

A bathroom that required around £11,000 worth of materials in 2019 now typically requires £15,000-£16,000 for the same specification, which is a staggering increase. The problem is that customers don’t always see the journey.

They haven’t spent the last six years reading supplier emails, dealing with fuel surcharges, shipping crises, wars, material shortages and inflation reports. They simply see a bathroom that used to cost one amount and now costs significantly more.

And perhaps the biggest frustration of all is this: I can think of countless reasons why prices have gone up. But I struggle to think of a single example where they have genuinely come back down.

So here’s the question for manufacturers, suppliers and the wider industry: When extraordinary circumstances disappear, should extraordinary surcharges disappear with them?

Or have we simply entered an era where prices only ever travel in one direction?