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Small firms still waiting for recovery

Small construction companies have set out the problems they are facing as four in five wait for signs of an economic recovery.

Just 16 per cent of respondents to a Construction News survey - carried out for our SME special issue - said they had started to experience a recovery from the recession. More than a third expected to wait until the first half of next year to see an improvement, while 20 per cent think they will not recover until 2013.

The companies’ views, gathered via an online survey and two roundtable discussions, revealed consensus about the main issues facing small construction businesses, regardless of the type of work they concentrate on.

Across the board, construction SMEs said the biggest problems they face are late payment, managing cashflow, complying with regulation, unreasonable client behaviour and rising input prices.

While more than half of the small firms CN surveyed made a profit last year, one in five made a loss, with the remainder breaking even. More than a third thought it was quite or very likely that turnover would fall in 2011, while 51 per cent thought it was quite unlikely, and 12 per cent thought it very unlikely.

Late payment from clients has long been a gripe of small businesses, and it is one that has worsened at a critical time.

The Experian Late Payment Index showed that overdue payments from construction and building firms were late by an average of 23.15 days in the final quarter of last year, compared with 20.5 days for the same period of the previous year (CN, p17, 10 Feb).

Waiting for payment can cause serious cashflow problems for small contractors, and remains a big obstacle to many surviving the recession. Two-thirds of respondents said getting paid on time was a major headache.

After payment and cashflow challenges, regulation was the biggest bug bear. Four in 10 firms surveyed said they spent up to one day a month staying compliant with regulation. Almost as many said they spent more than this.

Seven in 10 respondents said they spent more than a day a month working on tenders and pre-qualification documents for contracts.

Input costs have risen during the recession, largely due to fluctuations in global supply and demand, putting further pressure on firms winning work on tight margins.

Nine in 10 firms surveyed had seen their materials costs rise in the past 12 months, with four in 10 seeing rises of more than 10
per cent.

Opinion was divided on the effectiveness of the government - while 44 per cent said the coalition was handling the economy quite well, 40 per cent said it was not handling it very well.

A third of respondents thought it was quite or very likely they would employ fewer people in 2011 than 2010, but more than half thought it was quite unlikely.


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