Workloads shrink as cuts spark disquiet
A DRAMATIC drop in specialist contractors’ workloads is reported in the latest state of trade survey conducted for the NSCC (National Specialist Contractors Council) by Northumbria University. Flooring contractor members of the CFA were among those who responded to the survey covering the third quarter (July-September).
The CFA is one of 32 specialist trade organisations which belong to the NSCC. The newsurvey reveals a sharp decrease in expected workload with nearly three quarters of respondents predicting a fall over
the quarter to December 2010. This is a level not seen since the depths of the recession in 2008.
Uncertainty is rife among small contractors in the building sector, says NSCC chief executive, Suzannah Nichol MBE: ‘The construction industry is facing another difficult period while we wait for the impact of the
government’s Spending Review to become clear. The results of this survey highlight the detrimental
effect of uncertainty on the specialist sector.
‘Restoring confidence will be vital to the long term recovery of the construction industry and the wider UK economy.’ The Spending Reviews lashed capital budgets by up to 74% across all government departments with local authority spending set to fall by almost 30% over four years, making it unclear where future construction work will come from.
The impending cuts are already having an impact on enquiries and orders with 36% of specialist contractors reporting a decrease in enquiries and 45% a fall in the number of orders.
Payment practices have worsened for the third successive quarter with eight out of 10 (81%) of flooring and
other specialist contractors having to wait up to 60 days for payment.
Only 2% are being paid within 30 days.This is in spite of a commitment to 30-day payment throughout the supply chain in the public sector, which has been accounting for 40% of construction work in recent years.
Retentions is another major bugbear for specialist contractors with 83% having retentions monies withheld against them in retentions (an average of £163,446 per respondent). Almost a third of these monies are overdue for release at an average of over £50,000 per respondent. Just 11% used retention bonds as an alternative to cash retention.
Other findings of the newsurvey include:
Capacity: Half of all firms (51%) areworking at over 75% capacity. However, those reporting over 90% capacity utilisation has risen from 26%to 29%.
Skills:There has been a big increase in specialist contractors having more difficulty in recruiting skilled labour, up from 7% to 15%. A lack of required experience was cited as the principal reason for recruitment difficulty (75%), with 73% citing a low number of applicants with required skills and 60% citing a lack of required qualifications.
Tender prices: Falling prices are reported by 61% compared to 63% the previous quarter. Those reporting higher tender prices is down from 9% to 3%.
Suppliers prices: Two thirds (67%) of respondents report higher suppliers’ prices compared with 64% the previous quarter and 33% at the same time last year (2009Q3).
Margins: Reduced margins were anticipated by 59% compared to 58% last quarter. However, 7% anticipate increased margins compared to 4% the previous quarter.
Expansion: Those planning expansion before Christmas has fallen to 16% from 26%. The medium term outlook is also less positive with 27% of respondents planning expansion over the next 12 months compared with 38% the previous quarter.
More (from18% to 20%) are planning to downsize their operations. Most specialist contractors look ahead less than three months (46%) with 36% planning their work between three and six months ahead. Market
demand and the availability of finance are the most important factors in these plans.
Adjudication: Over a quarter (27%) have used adjudication to resolve disputeswith 73%of those using lawyers or consultants to represent them. The average minimum contract value that is considered for adjudication is £12,380.
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