Monday, September 5, 2016

Building engineering firms still optimistic…just

Members of the Building Engineering Services Association (BESA) enjoyed steady, if unspectacular, business growth in the first six months of this year, according to the Association’s latest ‘State of Trade’ survey.

During the period January to June 2016 figures were largely positive with 18% more businesses reporting turnover growth than decline (41% saw an increase versus 23% who reported a fall). However, the rate of growth has continued to fall since the previous survey, which covered the second half of 2015.

As expected, the EU Referendum result has dampened business optimism, but many members reported that it was too early to say what the overall impact would be. Just under half said it would have a negative effect on future growth.

BESA members who are optimistic about business prospects (35%) still outnumber those feeling pessimistic (20%), but the gap is narrowing and the ‘net optimism barometer’ is at its lowest level for three years.

A number reported that new business enquiries had slowed since the decision to leave the EU was announced and others suggested clients were putting pressure on prices as a result.  “They want the same business model, but with lower costs…over a number of years. That’s the challenge,” said one member.

Impact

The word “uncertainty” cropped up regularly in BESA members’ responses with some citing doubts about foreign investments and government spending on infrastructure; along with the impact on the pound as reasons why projects were either being delayed or re-costed.

In response, BESA and the Electrical Contractors’ Association (ECA) have launched a joint Brexit survey to gauge reaction across the sector and establish which issues are of greatest concern to members.

According to the State of Trade report, order books and enquiry levels remained broadly positive, but tender prices were static in the first half of this year, and companies were still experiencing rising labour and material costs – although at slightly reduced rates of increase compared with a year ago.

Late payments and skills shortages were the things business managers believed would cause them sleepless nights in the second half of this year.

Northern Ireland; London and the South-east; and Wales are the areas enjoying the highest levels of turnover growth; and the companies with the healthiest growth rates are those with turnovers between £0.5m and 1m; and over £20m.

There was positive news on the employment front with 35% of businesses reporting growth in direct employment.  Respondents also said they expected direct employment levels to continue growing and the survey picked up a simultaneous slowdown in the rate of growth of agency or sub-contract labour.

17% of businesses employed more apprentices in the last six months, compared to the previous period and the rate of growth in the number of companies taking on apprentices has remained broadly steady since last year.

The government has announced that all employers will receive 90% of the funding needed to train an apprentice from the taxpayer starting next May, but BESA’s director of training Tony Howard has called for greater urgency.

“We applaud the potential 90% government funding, but this is not approved yet and if we are to move successfully into the Trailblazers and Future Apprentices programmes we need funding clarity now – not next year,” he said. “If the government could accelerate the 90% funding to September – or even January – that would show real commitment to apprentice training and avoid employers delaying vital recruitment decisions.”

Clarity

A need to diversify the building engineering workforce was also picked up by BESA with Mr Howard and others pointing out that women account for just 9% of engineers in the UK. Greater clarity about funding would allow employers to plan for the future and embark on more strategic and diverse recruitment programmes including investing in short courses and other training designed to enhance the skills and career opportunities of existing workers.

BESA chief executive Paul McLaughlin said it was heartening to see a rise in direct employment, but urged employers to go further and faster.  “We need another major push on apprentice recruitment to start narrowing the sector’s skills gap,” he said.

He added that there were “not too many surprises in our latest set of results” with the market “slow but steady ahead of the EU Referendum vote”.

“The subsequent uncertainty is clearly going to have an impact. However, we should be heartened by the fact that many members remain cautiously optimistic,” said Mr McLaughlin.

“These are tricky times, but our survey shows it is not a universally gloomy scene – there are definitely bright spots. The building engineering services industry also has a key role to play in the broader UK economic picture so members have plenty to aim for in the coming months and years.”

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