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Building services contractors bounce back but familiar problems remain

28 May 19 The latest survey of companies in the building services sector indicates an industry showing signs of recovery after a difficult 2018.

Workload is getting better but costs are rising
Workload is getting better but costs are rising

The Building Engineering Business Survey for the first quarter of 2019 found that 75% of respondents had either maintained or grown their turnover since the fourth quarter of 2018. And 29% expect further turnover growth in the second quarter of 2019.

But there are still problems with rising costs and getting paid promptly for work done.

Materials costs rose for 73% since the previous quarter and 58% reported increased labour costs.

Only 19% of companies were typically getting paid in less than 31 days for private sector work. Public sector work is somewhat better, with 37% typically paid within 31 days.

Payments held in retention also remain an issue, with 58% saying that they had between 1% and 10% of their turnover tied up in retentions in Q1 2019.

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The survey was compiled by taking data from 442 member companies of four industry trade associations: the Electrical Contractors Association (ECA), the Building Engineering Services Association (BESA), the Scottish electrical contractors association (SELECT) and the Scottish & Northern Ireland Plumbing Employers Federation (SNIPEF).

ECA director Rob Driscoll said: “Although sector margins continue to be squeezed, businesses have started the year with a strong performance. The sector appears to be regaining confidence as we head into summer, but key cultural shifts that were identified after a challenging 2018, such as fairer payment practices, do not seem to be taking hold just yet and we have not seen out the uncertainty that the Brexit shadow may cast across the economy.”

BESA chief executive David Frise said: “It is encouraging to see confidence returning to the sector. However, the trend in higher labour costs will not be eased until, as a sector, we address our widening skills gap. This illustrates the increasingly critical need to encourage young people into the industry via apprenticeships.”

SNIPEF chief executive Fiona Hodgson said: “While the growing confidence in the sector is positive, it is clear challenges remain that must be urgently addressed. Poor payment practices will continue until the sector as a whole, along with government, takes action with meaningful change. Equally, the sector must focus on the recruitment of apprentices to address the skills gap and slow the increase in labour costs.”

SELECT managing director Alan Wilson said: “While it’s encouraging to see increased confidence in the sector, we continue to see business failures with some inevitably causing a domino effect down the supply chain. Perennial issues such as late and reduced payment and withholding of retentions, serves as a reminder that much still needs to be done to change the culture of the industry.”

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