Industry leaders have warned that the next three years could see a raft of civil engineering consultants and contractors going to the wall.
“Current spending is committed and there is no new spend coming through. Its going to leave the industry in a very different place in the next three years. There are a lot of suppliers that are not going to survive it,” said Bam Nuttall chief executive Steve Fox.
Fox was speaking at NCE’s Infrastructure Show. His comments came after cost consultant Turner and Townsend predicted that 2012 will see a surge in insolvencies.
Its Autumn UK market intelligence report – published this week – warns that 2012 could become known as year of the insolvency as – ironically - the recession nears an end.
“Historically, as the construction industry starts to recover from a recession the number of insolvencies within the industry starts to rise,” it says.
This happens as a general rule because contracts won in a recession period are generally at artificially low levels due to increased competition. These then become challenging as the industry starts to recover and prices begin to rise with it. Coupled with that, with a reduced workflow and increased costs, modestly capitalised suppliers find that positive cash flows that they rely heavily on are worsened.
Small and medium sized contractors also told NCE that getting paid for work done was becoming increasingly difficult. “Bad debt is the biggest risk we face now,” said the chief executive of one leading industry supplier. “We have to look very carefully at who we work for. But its a Catch 22, because if we decline to bid for work with a major contractor they want to know why, and you can end up getting blacklisted by them.”
Smaller civils firms at the Show voiced concern that their market was being invaded by larger firms on the hunt for work to keep their own people occupied.
“The big firms like Atkins just weren’t interested in the sort of work we do five years ago. But now they are desperate to keep their people busy and are squeezing our market. It’s tough.”
Fox, who is one of three industry leaders charged with rolling out Treasury body Infrastructure UK’s action plan to cut the cost of civils projects, said the industry had to also act by providing a stronger, single voice to government.
“The industry has got to have more a joined up voice. There are far too many industry groups fighting their own small corner. There is not one single big hitter,” he said. Fox was speaking at NCE’s Infrastructure Show.
Incoming ICE president Richard Coackley said he “wouldn’t be as presumptuous” to suggest that that single big hitter should be the ICE.
He said it was more the case that institutions and trade bodies needed to collaborate.