Diversify to survive credit crunch, warns ECA survey

Small and medium-sized firms expect to see a downturn in business over the next 12 months, according to the latest Electrical Contractors’ Association member business trends survey. While the news may not be surprising, it does confirm attitudes across the construction industry as private housing starts drop and the credit crunch gets a grip.

The most significant change in the survey is a drop in confidence, with just under 24% of members expecting to see revenue growth in the next 12 months, compared with almost 40% last year. Uncertainty is greater among smaller companies than large ones, perhaps because of the type of work on their order books. Also, commercial building is also predicted to drop by 14% over 2008-2010, representing a fall of £3.3 billion in the value of output.

With these facts in mind, the association is advising businesses to keep a tight grip on the purse strings and think about diversification in order to survive. David Pollock, chief executive, said: “As the UK business climate changes we are urging members to look at costs within their business plans and to keep an eye on cash flow.

“Despite these difficult times, however, there are still many areas within our industry where businesses can grow and prosper. New technologies are emerging at an increasing rate and demand for intelligent solutions provides firms with substantial opportunities. Diversifying into specialist areas could ultimately widen the scope for work and offer better prospects.

“Think about expanding into new areas of work and consider whether your business is vulnerable to making a loss on that job you have just tendered for.”

Cash flow is also a big worry in the contracting sector. The survey again highlighted late payment issues as a significant point of dissatisfaction for companies that deal in sub-subcontracting work. Only 24% of those that completed sub-subcontracts received all monies before the final date for payment.

“Firms need proactively to make sure that money is paid on time to prevent running into financial difficulty,” says Pollock. “It may be a bumpy ride ahead but businesses need to bed down now for the long haul.”

Workplace death toll declines

Provisional figures from the Health and Safety Executive show a slight fall in the number of fatalities in the workplace. In 2007-08, 228 workers lost their lives as a result of accidents or incidents at work, against 247 in 2006-07. Construction still tops the workplace death toll, with 72 fatalities, down seven on the previous year. Judith Hackitt, chairman of the HSE, said: “While we welcome the decrease in fatalities, the report suggests a plateau in the overall five-year trend. Where employers and employees work together to agree agendas and set targets to tackle real safety issues, they have made significant improvements. We want to see employers taking more responsibility to embed health and safety in their organisational culture and boardrooms.”

European support for small firms

The Forum of Private Business has urged the government to make a priority of proposals in the newly adopted Small Business Act for Europe. Phil Orford, chief executive of the forum, said: “The Act highlights the key issues of improving access to public procurement for small firms, reducing rates of VAT and tackling the scourge of late payment, which is a perennial concern for many of the UK’s smallest firms who need to maintain a healthy cash flow in order to survive.” In the past, the government has championed much of what has been included in the law. However, a lack of mandate compelling European member states to act means that the forum has to continue to push for real policies to help SMEs.

Pension ignorance

Nine out of ten people don’t know how much the basic state pension is and more than half don’t know what they will be entitled to on retirement. Research by employee benefits provider B&CE Benefit Schemes found, unsurprisingly, that pension awareness is lowest in 16-24-year-olds. But 48% of those in the 55-64 age group also did not know their retirement entitlement. John Jory, deputy chief executive of B&CE, said: “We need to do more to educate people about the reality of the state pension and what it means in monetary terms. Just as holiday pay does not cover the cost of a holiday, the basic state pension will not cover more than a basic level of subsistence.” Survey respondents said free personal advice from financial advisers and employer presentations would raise awareness.