Figures from the latest Electrical Contractor’s Association’s Member Business Trends Survey indicate that the UK construction industry is preparing for a challenging time over the next one to two years.
The most significant change, highlighted in the survey, is a lowering in confidence, with just under a quarter (24 per cent) of ECA members expecting to see revenue growth over the next 12 months compared to almost 40 per cent last year.
Uncertainty in respect of the next 12 months is greater amongst small and medium sized firms than larger firms. This possibly reflects their respective order books. For the first quarter of 2008 the proportion of members reporting a decrease in turnover increased relative to the last quarter of 2007 with a third of members (33 per cent) expecting to see a reduction in revenue over the next 12 months.
This comes as private housing new starts are forecast to drop to around 150,000* in 2008 as a result of falling house prices and limited mortgage availability. Commercial building is also forecast to drop 14 per cent over 2008-2010, representing a fall of £3.3 billion in the value of output. With these facts in mind, the ECA advises that now may be the time for companies to diversify into specialist areas in order to widen opportunities.
David Pollock, ECA Group CEO comments “Despite these difficult times there are still many areas within our industry where businesses can grow and prosper. New technologies are emerging at an increasing rate and the demand for intelligent solutions provides firms working within our industry with substantial opportunities. Diversifying into specialist areas could ultimately widen the scope for work and offer better prospects.”
The survey showed a major cause for dissatisfaction for companies dealing in sub-sub contracting work was payment. A mere quarter (24 per cent) of those who completed sub-sub contracting work received all payment before the Final Date for Payment. Other areas of concern were obscurity in the initial documents and failure to collect interest on late payments.
Well over a third (39 per cent) of sub-sub contractors said inadequate design had caused a large number of variations on projects. However, under half (44 per cent) reported that variation instructions were precise but problems occurred due to the unrealistic extension of time given to achieve the variations.
David Pollock, ECA Group CEO continues: “As the UK business climate changes we are urging ECA members to look at costs within their business plans and to keep an eye on cash flow.” Firms need to proactively make sure that money is paid on time to prevent running into financial difficulty. It may be a bumpy road ahead but businesses need to bed down now for the long haul. Pollock continues: “Think about expanding into new areas of work and consider whether your business is vulnerable to making a loss on that job you have just been asked to tender for.”
Notes to editors:
*Hewes Regional Construction Forecasts, May 2008
About the ECA
The ECA represents the interests of 2,800 member companies involved in electrical installation work. Collectively, the member companies have an annual turnover of more than £5 billion, employ over 30,000 operatives and support 8,000 apprentices in craft training. The role of the ECA is to provide a focus for the electrical industry in terms of safety, training, qualification, technological development and industry performance www.eca.co.uk
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