Engineering services confident despite rising material and labour costs
Over three in four engineering services organisations (77 per cent) say turnover increased or remained steady in Q2 2018, despite rising material and labour costs.
These are the findings of the latest BESA/ECA/SELECT/SNIPEF quarterly sector-wide Building Engineering Business Survey, sponsored by Scolmore.
Compared to Q1 2018, almost two thirds (62 per cent) of respondents reported an increase in material costs, and nearly half (45 per cent) reported an increase in labour costs in Q2. Retentions were held against 61 per cent of businesses, and late payment remains an issue for over half of respondents in commercial and public sector work.
The overall outlook for Q3 appears positive and optimistic: nearly nine out of ten (88 per cent) respondents predict their turnover will grow or remain steady for the quarter.
ECA Deputy Director of Business Policy and Practice Rob Driscoll said: “As we move into the second half of 2018, the effects of Carillion’s January collapse are still surfacing but overall, the second quarter showed further steady growth, with a positive outlook for the next quarter.
“We will continue to push for industry improvements on payment and retentions and we anticipate that new Government requirements for transparent payment reporting will help the industry to address its ongoing poor payment performance.”
BESA Public Affairs and Policy Manager Alexi Ozioro said: “It is encouraging to see growth among members and a more optimistic outlook for the sector. For a long time however, members have been concerned about rising material costs. The announcements of government’s preparations for a no-deal Brexit do not address these concerns, instead introducing further uncertainty into the market.
“We will be closely monitoring the situation, to see if enough has been done to minimise disruption and ensure a smooth and orderly exit in all scenarios.”
Darrell Matthews, Managing Director of SELECT, said: “It is a tribute to the resilience of both small and large employers that they are generally more optimistic about future work despite rising costs and recurring late payment issues.”
SNIPEF Chief Executive Fiona Hodgson said: “After a challenging start to the year for many of our members, it is heartening to see signs of steady growth in the industry. The industry continues to show resilience. However, there are ongoing challenges that must be addressed to provide certainty for businesses.”
The survey received 372 responses from companies across the multi-billion pound industry, mainly regarding their performance in Q2 (1 April to 30 June 2018), and expectations for Q3.