The agreement between Iran and the US in June to reopen the Strait of Hormuz is good news (assuming it holds). But it will be months yet before that conflict’s impact on lighting projects, lead times, supply chains and costs eases
‘Let the oil flow!’ wrote US president Donald Trump on his Truth Social platform in June as the US and Iran finally agreed a framework deal to end the war that has ravaged the region since the end of February.
Assuming the agreement holds (and, given its fragility and the number of moving parts involved, that remains something of an open question) and trade starts to resume through the critical Strait of Hormuz that will of course be great news for the world economy.
However, the impact of months of disruption, uncertainty and volatility on lighting – especially on supply chains and costs – has been significant and it will take months (at the very least) for ‘normality’ to return.
LEAD TIME AND SUPPLY CHAIN PRESSURES
There is, first, of course, the impact on the ground in the Middle East itself, with both hospitality and the wider construction sector hard hit. According to research by industry analyst Glenigan, for example, the region saw a ‘collapse’ in construction starts in the first quarter of the year.
Equally, hotels in Dubai alone have suffered a 70% to 80% collapse in visitor numbers, according to the BBC. The region is losing some $600m a day (£448m) in lost international visitor revenue, the World Travel and Tourism Council has calculated.
Closer to home, there has been a very real impact on fuel and energy prices, on raw materials and commodities, on supply chains, on petrol and diesel prices at the pump, and on inflation and the cost of money.
Combine these ripple effects with the global volatility caused by Trump’s tariffs and pre-existing supply chain, labour and energy pressures and it all most definitely adds up to – as this edition is focusing on – ‘lighting in challenging environments’.
‘Anecdotally, from a few clients and from the depot, we are seeing lead times slip, on materials. Especially those that are reliant on electronics from the Far East, so lanterns and controls,’ explains James Duffin, ILP Immediate Past President and senior lighting designer at Enerveo.
‘If we were quoted, say, eight weeks’ lead time at the beginning of the year, they’re now taking 10, 12, even 14 weeks to arrive. They’re still arriving but a lot later than we’d expect,’ he says, adding that this is in part because goods have had to go the long way round the bottom of Africa to get to Europe while the strait is closed.
‘We are seeing greater lead times,’ agrees ILP President Michala Medcalf, street lighting manager at Derby City Council. ‘How that impacts the client and/or the specifier, is that we are procuring goods and services based on capital funding, which is then reliant on being spent within a timescale and, not only being spent within that timescale but having a return on investment within a timescale,’ she adds.
Furthermore, delays in project delivery mean the need for more resources, which then equals more time and money needed on micro-managing projects.
‘What suppliers probably don’t get to see or understand is that there’s a big heap of governance and administration behind delivering any capital project. So, it’s very problematic for end users at the moment,’ Michala adds.
COST OF FUEL
‘From what I am hearing, from our contractors, the main impact is delays in delivery times, especially things like steel,’ agrees Richard Webster, street lighting services manager at Suffolk Street Lighting.
‘Also of course, it’s about fuel, just the cost of filling up. The feedback we are getting from our contractors is that that is causing them pain.’
‘Definitely,’ echoes Steve Long, lighting design engineer at DPL Lighting. ‘The thing I’ve noticed, with regards to site visits and doing a lot of miles, is that it is so much more expensive to fill up your car. That has impacted.’
This, in turn, does however potentially create an opportunity for the industry in terms of accelerating interest in, and demand for, switching to electric vehicles, both domestic and commercial fleets, highlights Mark Cooper, senior partnership manager at ubitricity.
‘EV sales have been increasing because of the cost-of-living challenge and petrol prices going through the roof. People, increasingly, are understanding the total cost of ownership. So, even if an EV costs you more initially to buy, its running costs are so much lower – especially if you’re lucky enough to be able to charge from home,’ he explains.
Even with the strait now (mostly) open, ‘it will still take six months plus to get things back to where things were before’, Mark adds. ‘So the cost of fuel is not going to reduce quickly, which obviously is good for EVs. But the government does also need to be thinking about other incentives to switching, such as free or subsidised resident parking zones outside your house, or perhaps enabling bus lanes and taxi lanes to be used by EVs,’ he adds.
Many councils, including Derbyshire County Council, have been switching over to electric vans and fleets, points out electrical assets commissioner and Chair of the ILP’s Local Authority Lighting Committee Rob Baines, albeit this is not necessarily specifically because of the situation in the Middle East. There is also more investment being seen in hybrid MEWPs [mobile elevating work platforms] that combine a diesel chassis with electric hydraulics.
‘I think there is more room for innovation. When times get tough, it makes people think about doing things differently, which is always a good thing,’ Rob says.
‘We do get emails from suppliers saying prices are going to go up, but nine times out of 10, we’re protected by tenders. But when tenders come to an end, we are noticing quite a stark price rise,’ he adds.
REMOTE WORKING AND PROJECT PLANNING
During the conflict, many of WSP’s Middle Eastern teams moved to working remotely, or from home, points out John Sutcliffe, the company’s local government sector lead and the ILP’s Senior President Elect. However, this was more to do with simply ensuring staff were kept safe than because of any reduction in project pipelines, he emphasises.
‘In fact, weirdly, we have seen some projects that had been shelved due to funding actually now being brought online and into year, mainly because of concerns that they see the construction cost doubling for current projects,’ John explains.
‘People are scared that, if they push projects into next year, they may not be able to afford them. So, they’re bringing them in now to try and save money. It’s really that invest to save piece. Having said that, I do think, even if the Middle East sorts itself out, the effects are going to be another six months minimum,’ he adds, echoing Mark Cooper’s analysis.
IMPACT ON TIMEFRAMES
‘I have to put my bids in well in advance,’ highlights Rob Baines of the current uncertainty. ‘So, my deadline is 3 July for a two-year capital programme that’s got to cover 2027, 2028 and 2029. I’ve got to try and figure out what my design fees are going to be and what my construction fees are going to be for projects two years down the line. That’s a hell of a lot of finger in the wind.’
On energy prices, too, Rob emphasises it is important to remember that the Ofgem energy price cap is only for domestic energy – energy procured by councils for street lighting and other electrical assets is not protected in the same way.
‘We purchase our energy through the Crown Commercial Service as part of a huge framework. They purchase the energy throughout the year and at market trends. When there’s a dip in energy cost, that’s when they’ll buy a lot of kilowatt hours (kWh) wholesale and then bank it. I get monthly emails with fully delivered rates already for April 2027 and so I can start looking at my budget already,’ he explains.
‘Fair play to them, largely my energy bill this year has remained unchanged. My load’s going up because housing estates are being adopted, but my kWh rate, it is there or thereabouts the same. The Ukraine conflict [energy crisis of 2022] impacted Europe a lot more than this one – so far.
‘The other thing to consider is the government is looking at delinking the gas price from the cost of electricity. Currently when gas goes up, electricity goes up; I don’t know how much that’s having a factor. Although, if the trend continues with energy going up, I am expecting quite a shock in April 2027, at least on the early forecasts I’m getting from the Crown Commercial Service,’ Rob adds.
‘We are bumping along; we’re bumping from one crisis to another. The stability that we saw 20 years ago just isn’t here,’ emphasises James Duffin.
‘Three years ago, we thought, “oh, we’ve got the Ukraine conflict” and then now we’ve got the Strait of Hormuz,’ agrees Michala Medcalf.
‘The geopolitical scene as it stands cannot going forward be treated as an exception. I think it’s got to be treated as the norm. I think we need to make that really clear now,’ she adds.
CROSS-INDUSTRY STRATEGY FOR LIGHTING?
Michala’s ‘make that really clear’ comment feeds into, arguably, a final wider conversation, and wider push, within lighting. This is that now, a time of adversity, may be precisely the moment for the industry to be working more closely with government to develop a bespoke industrial strategy for lighting.
The Department for Business and Trade last autumn published an industrial strategy for the UK, which identified the eight sectors that, ministers argued, will have the greatest growth potential over the next decade.
These were: advanced manufacturing, clean energy, our creative industries, defence, digital, financial services, life sciences, and professional and business services.
Whether this will need to be revisited in the wake of the current global volatility remains to be seen. Yet, as the Lighting Industry Association (LIA) highlighted at the time in its response, lighting as an industry and a sector can, irrespective, play an important role in helping to create and sustain growth in many of these areas.
Lighting, the LIA argued, is instrumental in promoting clean energy and helping to reduce energy demand across the built environment, in pioneering cutting-edge manufacturing, in innovation around digital (especially in terms of lighting controls, IoT and smart lighting systems), and in promoting competence and expertise in professional services areas such as design, compliance, and commissioning.
The creation of a specific strategy for lighting would probably not be right for a body such as the ILP to be taking a lead on, emphasises ILP Chief Executive Justin Blades. However, given that the last such strategy was generated more than a decade ago and lighting is now of course much changed, it is nevertheless something the industry should be discussing, coalescing around, he argues, perhaps co-ordinated through the Lighting Liaison Group umbrella body.
‘It is something we can all shape, that we can all collectively sign up to,’ he tells Lighting Journal. ‘And then hopefully everybody can gather around that flag and start to engage with policymakers, whether that’s in Westminster, Brussels, the devolved governments, regional mayoralties or unitary local authorities following local government reorganisation. That I think is the direction of travel with that one.
‘As has been highlighted, I do think there is an argument that, with the Ukraine energy crisis, we weren’t prepared for it as industry. We’ve gone through that, so once bitten, twice shy; the industry has – for now – been better placed to ride out the current volatility.
‘Ultimately, however, this is an opportunity for us as an industry to be talking with one voice, making people in power – policymakers with influence – aware that money doesn’t grow on trees, for want of a better description, aware of the impact volatility like this can have,’ Justin says in conclusion.
This is an abridged version of the article that appears in the July/August edition of Lighting Journal. To read the full article, simply click on the page-turner to your right.
Image: Pexels
