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Preview of the Year – SME

Recovery is in the air but the outlook is mixed for the industry’s smaller businesses.

Those that have survived are leaner and more agile and able to adapt to changes in the market.

But there are sector and geographical divides that could define success in 2014 for smaller contractors.

London and housing are two particularly bright spots, but some smaller businesses believe a North-South divide continues to hold back regional economies and will hinder SME growth this year.

Failure vulnerability

As the economy continues to grow, we could see medium-sized firms being particularly susceptible to going under. Administrations occurred throughout the UK in 2013 and solvency is a big worry for SMEs this year.

“It takes time and investment to train up skilled workers, so staff and skills shortages may limit small companies’ growth potential in 2014”

Those that secured work at rock-bottom prices when there was little else available may struggle with rising labour and material costs as the market picks up. It’s a concern for both smaller main contractors and specialists, particularly those reliant on a large supply chain.

The skills shortage is another worry for smaller businesses that may see more clients awarding deals based on resources and skilled labour.

It takes time and investment to train up skilled workers, particularly in specialist areas, so staff and skills shortages may limit small companies’ growth potential in 2014.

Infrastructure potential

A clear pipeline of government and local authority investment is something the whole industry desires. In 2013 the government promised much in terms of infrastructure spending, but the real test is whether any of this comes through soon enough to make a difference in 2014.

For specialists early on in the supply chain, such as demolition and groundwork contractors, it might. The growth in the commercial sector bodes well for these companies, too. But for those working on schemes later it will take longer to filter through.

“Companies may regret signing up to five-year frameworks that take up all their resources”

Frameworks were viewed by many SMEs as their saviour during the recession: guaranteed pipelines of work that could bring the sort of certainty often lacking during the downturn.

But as more work becomes available and prices begin to rise, companies may regret signing up to five-year frameworks that take up all their resources.

The Green Deal has not been the panacea that some smaller green companies had hoped for, but as numbers grow steadily SMEs will be quietly hopeful that it will begin to deliver in 2014.

Payment climbing the agenda

Although payment remains at the fore of industry debate, SMEs and specialists hope that as demand grows and the market picks up, there will be a shift in the balance of power to the point where smaller businesses won’t have to work with clients that don’t pay on time.

The issue has gained greater prominence in recent months, with more and more influential voices calling for better industry practices.

It won’t disappear overnight or even over the year, but the industry is making progress and SMEs should feel more confident exposing bad practice.

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