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Government's economic stimulus failing to yield results, warn contractors

Government efforts to stimulate the economy with accelerated public spending have so far failed to improve the workload of small and medium sized contractors, the Civil Engineering Contractors Association has said.

Six months ago the government announced that it was accelerated public spending, but only 16% of firms surveyed by CECA during early April reported that they have experienced increased work as a result. During the same period anticipated job losses have risen from 17% to 20% among SMEs.

The survey is the second CECA has carried out of its SME members since the onset of the downturn. In November 2008 the percentage of firms experiencing falling workloads was 66% per cent. This has now risen to 78% per cent.

Small and medium sized civil engineering contractors have also been hit by a rise in the number of firms in their supply chains collapsing. Seventy per cent of CECA members have reported that they have been hit by the financial failure of a client or supply chain member, up from 56% in the previous survey.

“Sadly six months on from the government announcing that it was going to accelerate spending to support the industry, this light at the end of the tunnel for smaller civil engineering firms seems further away than ever,” said CECA national director Rosemary Beales .

“The government talks of building Britain’s future’, yet is seems happy to consign many of those working to maintain and enhance the UK’s essential infrastructure to the past, forcing a swathe of job cuts on the sector. Steps must be taken, and taken now, to loosen the financial and bureaucratic shackles that are preventing vital projects from going ahead.”

On a slightly more positive note, there has been a minor reduction in the number of firms that reported payment disputes with clients, down to 69% from 76%.

CECA SME survey - National results

Banking

Forty seven percent of firms had experienced some difficulty accessing financial support from their banks since the start of the downturn, with 11% finding it significantly more difficult to do so. Seven per cent of firms had applications for credit refused by their banks since the start of the downturn.

In the same period 58% of firms reporting that their banking costs had risen. Twenty two per cent reported that such rising banking costs were having a significant impact on their business.

Workload

Seventy eight per cent of firms have seen their workloads reduce since the start of the downturn, with 32% of firms reporting that these slumps are having a significant impact on their business.

The average level of confirmed work in firms’ order books has dropped below four months (3.7 months), down from an average of more than seven months (7.7 months) a year ago. Worryingly, 32% of firms had less than two months worth of confirmed future orders.

Just 16% of firms claim to have felt any increase in work as a result of accelerated investment in public sector projects.

Payment

Firms are also finding it harder to get paid, with average payment periods increasing by at least 8.5 days from this time last year. Sixty nine percent of firms have seen an increase in cases where clients dispute payment, with this becoming a regular occurrence for 29% of firms.

Forty five percent of firms surveyed reported that they had even been asked by clients to accept reduced payment for work carried out. More than two thirds of the firms that found themselves in this position rejected the suggestion.

Other business Issues

Forty two percent of firms had struggled to secure the credit insurance that they required in order to carry out their business, as the main providers of such insurance stepped back from the construction market.

Seventy percent have been hit by the failure of either a supplier or client in the past year, with this having a severe effect on the businesses of 8% of firms.

Almost half (48%) of firms have experienced greater difficulty since the start of the downturn in securing retentions that were owed to them by clients.

Employment

Based on the responses to the survey, CECA estimates that the workforce for SME civil engineering contractors has shrunk by around 10% since the start of the downturn. If current trading conditions persist, it is expected that a further 11% will lose their jobs in the coming six months.

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