Member Article

North West contractors fighting on two cost fronts says industry research

North West contractors are battling the dual cost pressures of the rising cost of resources coupled with an escalating price war, according to prequalification supplier database, Constructionline.

In a survey of 103 suppliers, three quarters (75 per cent) said they have had to lower their rates in order to win work, with the vast majority (96 per cent) claiming that cost is the most important factor to clients when tendering.

At the same time as facing downward pressure on quoted prices, the rising cost of materials is also making life difficult.

A massive 89 per cent stated they had noticed an increase in material prices over the past 12 months, with 60 per cent agreeing it was one of the biggest cost pressures their business’ faced, coming only behind paying wages (70 per cent).

Constructionline’s survey identified it as the main threat to the industry’s recovery in 49 per cent of cases.

As a result, few of the survey’s respondents believe that they are benefiting from the reported upturn in construction sector activity. More than half (52 per cent) claim they are yet to see the effects trickle down the supply chain.

Despite operating under squeezed margins, the survey did unveil some positive findings. There is evidence that workloads were increasing among more than half of respondents (54 per cent), and a similar number (53 per cent) expecting to see a rise over the next three months. The number of confirmed projects in the activity pipeline has also increased for 43 per cent of those questioned.

There is also an increase in the number of new jobs being created. In the last quarter, 42 per claimed to have recruited new staff, and 38 per cent are expecting to do so over the next three months.

In contrast, only 23 per cent would consider taking on an apprentice, with just under half (44 per cent) saying that they would be more inclined to do so if given easier access to funding.

Commenting on the survey, Neil Thompson, director, Constructionline, said: “On the face of it, inflated order books and an influx in recruitment activity would suggest that the construction industry is once again on the road to recovery.

“But beyond these stats, there is a very different picture. Higher outgoings and lower returns means that conditions still remain incredibly challenging.

“While workloads are indeed improving, the sector’s recovery is starting from a very low base after years of decline. Fierce price competition, a legacy of the recession, lingers over the sector’s smaller firms while larger firms are finding they still need to hunt at the tail end of the market.

“While the recovery continues to build, it’s important that clients remember the risks posed by ‘lowest price wins’, to place more emphasis on skills, competencies and developing the workforce.”

The results represent the opinions of 103 Constructionline members in the North West. Almost half of respondents (45 per cent) turnover less than £1m annually. The vast majority (82 per cent) have revenues of less than £5m.

This was posted in Bdaily's Members' News section by Simon Malia .