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Civil engineering contractors' body sets out plan to save 8,000 redundancies

The Civil Engineering Contractors Association (CECA) has set out its ten point plan to avoid more than 8,000 redundancies among the UK’s small and medium sized civil engineering firms.

Figures released by CECA today show that across the UK as many as 17% of SME employees – an estimated 8,400 workers - could lose their jobs as a result of the current market downturn.

The figures are based on the results of a survey of small and medium-sized members of the Civil Engineering Contractors Association carried out in October that looked at the impact of the current economic downturn on the civil engineering sector.

Key concerns highlighted include falling workloads, difficulty securing and maintaining bank funding, increasing delays on payments by clients and steep cost inflation. The survey in detail.

"There is little sign that the overall market for civil engineering contractors is improving as we head into 2009, and our research shows that for SMEs especially, the situation is getting steadily worse," said CECA director Rosemary Beales.

"If the SME sector is allowed to contract, through redundancies and businesses failing, then the construction industry will lose capacity and the skills and resources lost will have to be replaced - at great expense - when demand for infrastructure development returns.

"Steady investment now could maintain civil engineering SMEs through difficult times and offset a far greater outlay when the country needs to call on their resources in the future.

"Next week, the Government publishes its Pre-Budget Report. We hope to see measures similar to the ones set out in our economic action plan put forward that will boost the fortunes of civil engineering contractors and give much needed confidence to a sector hit hard by economic issues beyond their control."

Chancellor Alistair Darling is expected to announce a £1bn package of building, transport and other infrastructure projects to help kick-start the economy in his pre-budget report on Monday.

But CECA is nevertheless calling for the government and the banking sector to commit to its 10 point action plan, working with the industry to secure the future of the infrastructure sector as a whole.

CECA economic action plan for small and medium-sized contractors

• Accelerate expenditure on planned public sector infrastructure works
• Ensure prompt payment of amounts due to small and medium sized firms
• Demand fair treatment of small and medium-sized contractors by banks
• Encourage the use of local firms on work under EU procurement regulation threshold
• Reinstate rate relief on empty commercial property
• Prevent the use of on-demand bonds and remove retentions from future contracts
• Cut planning, environmental and heritage consent bureaucracy
• Take steps to reinvigorate the housing market
• Streamline procurement of construction work, selecting on quality, rather than solely on price
• Protect the next generation of skills

Findings of CECA Small and Medium Sized Contractor Survey

Banking

Across the UK 46% of SME civil engineering contractors have seen a rise in the cost of their banking arrangements as a result of the economic downturn, while 28% of firms have found it more difficult to secure new funding from banks

Housing

Across the UK 35 per cent of SME civil engineering contractors surveyed relied upon the housing sector for more than 20 per cent of their annual turnover. These firms anticipated losing around 46 per cent of this housing-associated work as a result of the slump in the sector.

Public sector work

37 per cent of contractors have seen a reduction in the availability of public sector works in the last 12 months across the UK.

Overall total workloads

66 per cent of UK civil engineering contractors have seen a reduction in total workloads, with 31 per cent of SME firms claiming to have less than two months worth of confirmed orders. 12 months ago this figure was just 9.6 per cent.

Payment

The average period taken for UK civil engineering contractors to be paid by clients increased by more that eight days in the past year, with 30 per cent of firms seeing payment periods increase by more than 20 days. 76 per cent of firms had seen an increase in the number of clients disputing payments recently, with this being becoming a regular occurrence for 24 per cent of firms. 42 per cent of firms have found increasing difficulties securing retentions owed to them by clients in the last year.

Input cost inflation

Most firms (49 per cent) claimed to have experienced cost inflation in the order of 7-10 per cent in the last year. 12 per cent said that inflation had been greater than 10 per cent.

Supplier/client relationships

56 per cent of firms have been hit by the financial collapse of a client or supplier in the last 12 months, with 9.8 per cent of firms reporting that this has had a severe effect on their business. Meanwhile nearly four in ten firms have struggled in the last year to secure credit from suppliers during the same period

Employment

82 per cent SME civil engineering contractors expect to make job cuts in the next six months if current trading conditions continue, with 48 per cent of having already shed staff. Based on Office of National Statistics figures for SME civil engineering contractors in 2007 (conservatively estimated at 50,000), this would equate to predicted total job losses of 8,434, or 17 per cent of the total SME workforce, by Spring 2009. This figure represents 3006 jobs already lost, with a further 5428 to go if the situation does not improve.

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