Half of specialist contractors do not know where their work will come from after the next three months, research has found.
The National Specialist Contractors’ Council’s state of trade survey for 2011 quarter three, shared exclusively with CN, has sparked calls for government to invest urgently in stalled projects and reveal a definitive pipeline of work.
The survey found that 51 per cent of specialist contractors are unable to plan beyond the next three months, while 31 per cent are planning their work three to six months in the future.
The findings come in the week that David Cameron promised an “on an all-out mission” to accelerate critical construction projects through improved funding, planning and regulation.
On Tuesday estimates from the Office for National Statistics revealed that construction output declined by 0.6 per cent in the third quarter of 2011, making it the sector with the biggest contraction in the period, against a backdrop of national GDP growth of 0.5 per cent.
NSCC chief executive Suzannah Nicol said a lack of budgetary commitment by clients – from local authorities to supermarkets – is leaving specialists in the dark. Government investment is desperately needed to restore confidence in the long term recovery of the industry, she said.
“These businesses have no idea what they are going to be doing in January, or in three months time. It’s a frightening place to be for any business.
“In the past years, they have been reasonably confident that the work will come through. Even the main contractors are starting to feel the squeeze,” Ms Nicol said.
The survey found that, in line with the previous quarter, just 2 per cent of respondents were paid within the government’s required public sector payment period of 30 days.
The survey found 77 per cent of respondents wait up to 60 days for payment and 21 per cent face payment periods of 60 days or more. In addition, 80 per cent have retention monies withheld, with a third overdue for release.
A least four firms went under in the last fortnight, including Barnsley-based steel fabrication specialist JGP Engineering – a supplier to BAM and Willmott Dixon – with debts of £800,000.
Bibby Financial Services is an NSCC partner that provides finance based on a subcontractors debtor books.
Jason Heath, specialist finance director, said smaller companies were still struggling to secure bank finance.
“Given the pressures of the industry and the extent of the government cuts, it is difficult for firms to plan ahead and see where the next contract will come,” Mr Heath said.
Last week, the Construction Products Association downgraded its output forecasts for the next two years, saying the private sector is struggling to make up for public sector cuts.
Kelly Forrest, senior economist at the CPA, said it expected the latest ONS output figure to be revised down once all the data for September had been included.
Later this month, Chancellor George Osborne is set to announce his autumn statement, along with the National Infrastructure Plan 2 while the Plan for Growth is set to come from the Department for Business.
UK Contractors Group director Stephen Ratcliffe said: “The public sector is 40 per cent of construction – getting some better signals on a forward pipeline is the single most useful thing the Chancellor can do in his autumn statement.”
NSCC 2011 Q3 State of Trade Survey
51 per cent have a business planning horizon of less than 3 months
22 per cent expect an increase in workload, a sharp fall from 41% last quarter
32 per cent anticipate a decrease in workload, up from 14% last quarter
2 per cent are being paid within 30 days, the same as last quarter
77 per cent received payment between 30 and 60 days and 18% were paid between 60 and 90 days. 3% wait over 90 days to get paid
67 per cent reported that they had carried out public sector work in the last quarter and of those, 32% said that they had been paid within 30 days on all these contracts
80 per cent have retention monies withheld from them and 33% of these retention monies are overdue for release
39% report a decrease in enquiries, up from 29% last quarter.
37% report a decrease in orders, down from 38% last quarter.