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Civils firms suffering costs squeeze

Civils contractors are fighting soaring costs and falling tender prices as workloads in many sectors continue to decline, according to the latest research from the Civil Engineering Contractors Association.

Three in four respondents to Ceca’s most recent workload trends survey, which was carried out in April, reported rising costs.

More than four in 10 said costs were rising faster than a year ago.

Welsh civils firms appear to be feeling the pressure more than those in Scotland and England, with 82 per cent of those surveyed reporting cost rises.

However, a balance of 21 per cent of those of firms operating nationally in the new work sector said tender prices declined from a year previously, as did 11 per cent of companies involved with repairs and maintenance work.

This was an improvement from the previous survey in January, when the balances reporting a decline stood at 45 and 38 per cent respectively.

Ceca director of external relations Alasdair Reisner told Construction News: “Inflation is something lots of our members list in their main concerns. Falling workload is there too, but the input costs are rising and there’s very little upside.

“There’s only so much you can cut before it becomes suicide bidding and obviously contractors don’t want to do that.”

Contractors are tackling rising costs and falling prices along with increased competition as workloads continue to fall.

Ceca’s survey discovered that 43 per cent of participants reported lower workloads in the first quarter of 2011 than in the same period last year. Only 16 per cent of respondents reported an increase.

The body said its data revealed a fragmented recovery, with members reporting growth in workload in the rail, water and electricity sectors, although this did not offset the declines in road work.

Workloads within railways showed continued improvement with 24 per cent of firms reporting that workloads rose in the past 12 months. The contractors working within the water and electricity sectors were the only others to express positive balances, of 23 and 17 per cent respectively.

Mr Reisner said decreasing public spending was still causing uncertainty among Ceca’s members, but that upswings in workload in the rail and electricity sectors indicated some signs of much-needed revival in private sector work.

He added: “Ceca is hopeful that the policies now being implemented by Infrastructure UK and others will support a return to growth in the civil engineering sector.

“However, the results of this survey demonstrate that, for an industry being squeezed between rising costs and falling tender prices, the government has no time to lose in taking important measures to streamline procurement and encourage private sector investment.”

 

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