Analysis of data from ECIC shows that, in the past year – from July 2013 – to July 2014 – the number of electrical contractors that have ceased trading has fallen 25 per cent compared to the same period 2012 – 2013. However, just looking at the past year alone, in the last six months – from February 2014 to July this year – the number of electrical contractors that ceased trading has fallen a huge 91 per cent compared to the previous six months.
However, the early stages of an economic recovery are often harder for some businesses to negotiate than recessions themselves. As work ramps up, materials and labour need to be funded at a time when cash reserves will be low having sustained businesses during the downturn. In addition, with more work on the books, insurance premiums will rise adding further pressure to cashflow.
Phil Scarrett, sales and marketing director of ECIC, said, ‘The fall in business failures is a very welcome sign of an improving outlook for the electrical sector, but now is the time to be very cautious with cash flow. Electrical contractors are often responsible for large upfront costs for equipment as well as manpower. It is therefore really important that they are on top of their cash flow, particularly as they will often have to chase customer payments invoices at the end of each month.
‘By spreading their insurance premium over monthly payments, electricians can manage their cash flow more effectively which helps ride out the recovery, ensuring the downward trend we are seeing in business failures continues.’