A survey of members of the Civil Engineering Contractors Association (CECA) is warning that there will be 40,000 fewer jobs in civil engineering by the end of 2010. The Association represents over 350 contractors of all sizes covering approximately 80% of the civil engineering market in the UK.
From a peak of 151,000 in Q3 2007, the market has declined so steeply that contractors forecast they will only be able to sustain a workforce of around 111,000 by Q3 2010 - 9,000 people fewer than in 2001.
The results of the survey show contractors are clearly struggling with the impact of a crisis in workload. Following the survey, CECA is calling for urgent action by Government to address workload, cash flow and procurement.
WorkloadThe survey showed that 85% of contractors who responded have not seen any evidence of an increase in work available as a result of accelerated investment in public sector projects. The recent CECA Workload Trends Survey revealed the worst figures in 13 years for firms reporting lower workload.
CECA is calling for urgent action to get projects on the ground. The contractors’ organization said that budgets should secured and long term plans for investment in areas such as transport, energy and flood and sea defences should be devised and published in the next 12 months in order to end the current uncertainty over public spending on infrastructure.
CECA has suggested that support for SME contractors could be extended by re-examining the policy pursued by some public sector clients of creating frameworks by bundling several smaller contracts into one block of work. CECA said that although this approach brought efficiencies, it effectively put large amounts of work beyond the reach of smaller civils contractors. Some frameworks should be smaller or clients should consider letting some contracts for individually outside of larger frameworks, so that SME could compete and win work.
The survey shows that contractors remain unable to access working capital support though banks, because construction is currently seen as an unsafe investment.
Contractors are calling on the Chancellor to keep VAT at 15%, freeze fuel duty and to continue to promote 10 day payment among all public sector construction clients. and to stress prompt payment wherever possible.
Procurement
CECA also said that £1billion is wasted each year through the costs incurred by contractors in pre-qualifying for contracts. Contractors reported a rise in the average length of tender lists from 5 firms before the downturn to 8 firms since the downturn, with some reporting tender lists growing by several multiples of this.
Contractors are therefore investing time and money on tenders with fewer chances of converting them into work, adding to their costs and further reducing their working capital.
CECA has proposed that the Chancellor should instruct the new Chief Construction Adviser to investigate ways in which the public sector as a construction client can lead the way by adopting and spreading best practice procurement, cutting out the waste in pre-quals and reducing tender lists.
Commenting, Rosemary Beales, CECA Director, said:
“The sector is not special pleading. There is a workload crisis in our industry but we accept the situation with public finances will mean that extra money available for investment in infrastructure is going to be in short supply. However, there is more the Government could do to boost the sector and head off the run of redundancies that will reduce the workforce by 40,000 jobs in the 3 years since 2007."
“Workload confidence could be restored by creating long term plans for investment, based on the 5-50 year horizon of need we hope will come forward from Infrastructure UK when it is established.Steps to relieve cash flow problems could include ensuring public money put into banks is used to support business lending, stressing prompt payment and a promise to keep VAT at 15% for another 12 months.
“Procurement currently creates much avoidable waste, ultimately paid for by the taxpayer. A review of procurement, particularly of the Pre-Qual system and the tendency to include more contractors on tender lists, is long overdue and should be an early priority of the new Chief Construction Adviser.
“The forecast fall in workforce, from a peak of 151,000 in 2007 to a 10-year low of 111,000 has got to focus minds on the plight of the UK civils sector. The Chancellor must act.”