SME profits creep up, but skills and materials troubles persist, says ECA

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%) of respondents reported a rise in turnover in Q3 2021 compared with Q2 2021, while nearly a third (30%) reported no change. Well over half (57%) 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, says: “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%) 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%) 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%) said staff shortages was their ‘number one’ business concern.

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

Iain Mason, Director of Membership & Communications at SELECT, says: “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 says: “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.”

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