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AT THE HEART OF HIRE


RAISE Y OUR RATES!


After the painful adjustment to the economic downturn from the middle of 2008 and throughout 2009, last year brought some relief to the hire market, as is clearly demonstrated by our Tool Hire Top Ten 2011 study commencing on page 25. All the Top Ten tool and equipment hirers are reporting gradual improvements in activity levels. The severe weather may have taken its toll in December, but despite the economic gloom, hirers are, generally, in an upbeat mood as the 2011 Executive Hire Show beckons.


Confidence is returning and, with it, an awareness of the need to replenish and up-grade hire fleets. There is, however, one major question that we must address - how do we justify fleet re-investment when cost inflation of both new equipment and overheads, such as fuel, is running well ahead of the hire rate?


How far have rates fallen in the last two years? GAP Group’s Douglas Anderson calculates that rates fell between 10% and 15% from the second half of 2008 through 2009. Speedy’s Steve Corcoran, simply admits, “Rates have become ridiculous. We have all been desperately chasing prices down to try and maintain cash flow and retain market share. We are as guilty as anyone, but, more importantly, we have still tried to maintain service levels, whereas others have not.”


In addition to the Top Ten tool and equipment hirers, we have spoken to other leading hirers to canvass their views. They know rates are inadequate for the long term health of the industry, and, in some cases, for the survival of companies. We particularly welcome the recently-announced departure of GE Equipment from these shores, after years of complaints from competitors about its alleged uneconomic hire rates.


The hirers that we spoke to certainly demonstrated a much more responsible attitude towards rates. They showed a concern not just for their own company, but for the well-being of the industry. Aggreko UK MD Robin Richardson is obviously concerned by the continued inadequate hire rates within the power generation market. His objective for 2011 is to push rates to a level where Aggreko can generate sufficient growth to justify investment. Having invested heavily in service, Robin Richardson worries that, unless service remains the focus of all hirers, specialist or general, the overall reputation of our hire industry will suffer.


Selwood MD Chris Garrett expresses similar concerns, arguing that rate rises are essential to justify re-investment. “Customers expect hirers to provide modern, well maintained plant with health, safety and security features. The cheaper the hire rate, the slimmer the margin for the hire company, the more service will be affected and the age of plant will lengthen.”


Charles Wilson Engineers’ MD David Gallagher points out that, last September, he took the decision to strictly impose an increased minimum hire rate on one particular range of equipment. Customers were warned in advance and few orders were lost. In his view, with current high levels of utilisation, now is the time to push rates up again.


During last year Speedy achieved a 4.5% compound improvement in rates, “but it is not enough” insists Steve Corcoran. “We need to benchmark the service we provide, not the price. If you don’t, you end up price matching. You need to understand the differences between British Airways and Ryanair and what each operation costs to run.” The message is clear. For the long term health of our hire industry, raise your rates now.


...AND RE-INVEST AT THE SHO W


You’re surely got the message by now? The fifth Executive Hire Show takes place in just over a week’s time and it’ll be our best event to date. There’ll be 34 new exhibitors and 81 loyal innovative suppliers showing a staggering 69 new products, not to mention the dedicated Innovation Zone.


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Following the closure of SED, we’ll also have more plant on show than anywhere else in the UK this year. The Executive Hire Show is the only Must-See exhibition in 2011. We look forward to seeing you at the Ricoh Arena on 9 & 10 February.


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