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17 Dec 20201 minute read

Survey: Signs of recovery despite looming uncertainty

Survey: Signs of recovery despite looming uncertainty

More than 2 out of 5 businesses (43 per cent) expect their turnover to fall by the end of Q4 2020, according to a new engineering services sector survey.

The same survey also revealed that just under 1 in 3 businesses (30 per cent) say they are not clear about the forthcoming business implications of Brexit.

However, the survey highlights a significant shift towards recovery compared to Q2, when almost two thirds (60 per cent) of businesses reported a drop in turnover during the first half of the year: nearly two thirds (64 per cent) of businesses reported the same or increased turnover in Q3, with only one third (35 per cent) reporting a decrease.

Rob Driscoll, ECA director of legal and business said:

“The engineering services sector typically feels the impact of economic downturns later than the rest of the economy, but the shockwave of coronavirus in Q2 was unprecedented for both demand and supply within the sector. We will likely be on the road to recovery for a while longer. 

“However, it is encouraging to see that, although there is much work to be done in the final sprint towards the Brexit transition deadline, the industry has shown great resilience and signs of recovery in the second half of a very tough year. This bodes well for 2021 which will reveal the true impact of Brexit, bear the financial impact of COVID-19 at year end, the culmination of claims and the challenges of changes to VAT, CIS and IR35.”

Alan Wilson, Managing Director of SELECT, said: 

“These findings show that businesses are still understandably cautious about the recovery that lies ahead, and that finance continues to be an issue. Businesses have been forced to invest in new and unexpected areas to ensure ongoing protection against the impact of COVID-19 and will continue to spend this money well into 2021. 

“At the same time, productivity in many jobs remains low compared to pre-COVID rates, so it is vitally important to ensure that a proper pipeline of work is established to keep businesses running effectively. Payment is equally important, and it’s crucial that all monies owed are paid on time to help keep businesses trading.”

Fiona Hodgson, Chief Executive of SNIPEF said:

“While the latest survey shows some positive news with most members having a successful Q3 in terms of turnover, there is a concern that this might change in the upcoming months. This along with rising costs and payment delays may prove to be a challenging time for members. As there is still confusion of how Brexit will affect businesses, we are urging members to be as prepared as they can be for any changes. We will continue to monitor the position and keep members updated.”

Employment of agency workers and subcontractors rose for the first time since late 2019, with just under a fifth (17 per cent) reporting increased use of agency workers or subcontractors – almost double the figure reported in Q2.

Engineering services businesses continue to feel mounting cost pressures, with over half (51 per cent) of survey respondents reporting an increase in material costs in Q3 compared to Q2.

Looking ahead to 2021, three quarters (75 per cent) of respondents expect the cost of electrical and electronic products to either stay the same or rise after the Brexit transition deadline of 31 December 2020.

Getting paid on time continues to be a challenge for businesses. Despite public sector rules mandating payment within 30 days, less than half (41 per cent) of direct contracts and just 27 per cent of indirect contracts in the public sector were paid during this period.