The latest sector-wide Building Engineering Business Survey, sponsored by Scolmore and commissioned by BESA, SNIPEF, ECA and SELECT, has revealed that a quarter (26%) of businesses in the sector have reported an increase in turnover, while another quarter (26%) said turnover had fallen in Q4 2018, compared to the previous quarter. Outlook for the first quarter of 2019 is also subdued, with three in four respondents (74%) saying that they expected their turnover to stay the same or fall compared to Q4 2019.
Nearly two thirds (61%) of engineering services organisations have seen their material costs rise in Q4 2018, compared to Q3, and almost half of the respondents (48%) reported increased labour costs during the final quarter of 2018.
Payment and retentions remain a challenge. Almost three in four respondents (77%) said they are typically paid more than 30 days after a public sector project, and more than eight in ten (83%) are paid more than 30 days after a commercial project. Almost two thirds (58%) said that up to 10% of their organisation’s turnover was tied up in retentions in Q4 2018 – a 6% increase on Q3 2018.
BESA CEO David Frise comments: “There is a pattern emerging here. The latest forecasts from the CPA, which we recently shared with our members, indicate similar findings with a market forecast of just 0.3% growth in 2019 and material prices going up by 5.1%. The challenge for contractors across the sector is maintaining cash flow in a climate where payment issues still reign. It is in times like this that the work of organisations like BESA, ECA, SELECT and SNIPEF is even more vital than ever.”
ECA CEO Steve Bratt adds: “These latest figures indicate a squeeze on margins due to a downward trend in turnover and an upward trend in labour and material costs. The current business climate is challenging, with firms facing the knock-on effects of Brexit uncertainty, more challenging contractual conditions and ongoing payment issues.”
ECA, BESA, SNIPEF and SELECT represent over 5500 businesses across the UK and member businesses have a combined annual turnover of £12 billion. The survey received 403 responses from member companies.
