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20 Dec 20211 minute read

SME profits creep up, but skills and materials troubles persist

SME profits creep up, but skills and materials troubles persist

The latest quarterly Building Engineering Business Survey, conducted by leading electrotechnical trade body ECA in partnership with BESA, SELECT and SNIPEF, has revealed that while SME turnovers continue to recover from the pandemic, finding the right people and materials to cope with mounting orders is a growing cause for concern.

Under half (44 per cent) of respondents reported a rise in turnover in Q3 2021 compared with Q2 2021, while nearly a third (30 per cent) reported no change. Well over half (57 per cent) reported that their overall turnover was higher in Q3 2021 than for the same period in 2020.

Rob Driscoll, ECA Director of Legal and Business, said:

“The industry has entered the Christmas period with some optimism – a far cry from last year, when uncertainty around Brexit, COVID and UKCA marking gripped the economy.

“Order books are slowly filling and SMEs – the backbone of the economy – have done remarkably well during this second pandemic year. However, the skills shortage and materials crisis show little sign of resolving any time soon. 

“This risks creating a ticking time bomb. Contractors can fill their order books today but regret it when attempting to deliver those contracts during 2022 at prices fixed in 2021. We echo the Construction Leadership Council’s advice, which encourages parties to share the risk of market volatility.”

A third (33 per cent) reported that their overall business performance was ‘about the same’ in Q3 2021 compared to Q3 2019, before the coronavirus pandemic, while 1 in 5 (20 per cent) reported it to be ‘worse’ or ‘much worse’. 

When asked to rank their most worrying business concerns, materials shortages, staff shortages and delays to projects came out on top. Two in 5 (39 per cent) said staff shortages was their ‘number one’ business concern.

Staffing continues to pose a challenge for SMEs in particular. Of the 52 per cent of respondents who said they currently has vacancies in their business, over a quarter (26 per cent) said there were ‘not enough applicants’, and a third (31 per cent) said applicants lacked the right skills or qualifications for the job. 

Iain Mason, Director of Membership & Communications at SELECT, said:

“From our own Member feedback, it is clear that 2021 has been an extremely busy year for many businesses, and it is to be hoped that a solution can be found to the ongoing supply and material issues to help contractors keep pace with demand.

“As far as skills are concerned, the number of new electrical apprentices and adult trainees in Scotland recently reached a 12-year high, and it is to be hoped that this encouraging trend continues into 2022 and beyond. Having a qualified and competent workforce is essential if we are to build the electric future that awaits us all.”

BESA director of legal and commercial Debbie Petford said:

“With new construction work predicted to grow strongly in 2022, there are plenty of reasons to be optimistic. 

“The building engineering sector is showing strong signs of resilience, but we have major underlying challenges around materials and skills shortages, which are driving inflation.

“The Construction Products Association also reports that more than 200,000 experienced people have left the industry since the start of the pandemic. That loss of expertise creates a particular challenge, especially when workloads are rising. Companies will have to be very focused on attracting and retaining talent in the coming years.”

Survey open dates and respondents

 The survey received 204 responses from companies across the multi-billion-pound building engineering services industry, mainly regarding their performance in Q3 2021 (1 July to 30 September 2021), and expectations for Q4 2021.

Responses were collected from 16th to 30th November 2021.

The engineering services sector

Overall, the engineering services sector is estimated to account for some 40 per cent of UK construction and maintenance turnover.

ECA, BESA, SNIPEF and SELECT represent over 5,000 businesses across the entire UK, covering England, Scotland, Wales and Northern Ireland. Member businesses have a combined annual turnover of £12 billion, spanning building, infrastructure and maintenance activity.

The four trade bodies cover a broad range of engineering, design, installation and facilities management activity, including electrical, heating, plumbing, energy management, micro-generation, ductwork, ventilation, fire and security, and wireless systems.

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