Drop in turnover expected by half of small construction firms but worst of sector's job cuts are over, shows survey

A new survey has painted a grim picture for small firms, with turnover widely forecast to fall and almost a quarter concerned about going bust, but it also suggests the worst of the job cuts may be over for the construction sector.

The data, commissioned by business risk insurer QBE, showed that 48% of construction firms expect a decrease in sales turnover in 2009 – substantially worse than for SMEs overall, with 40% expecting a decrease.

Meanwhile, two out of three SMEs said these were the most difficult conditions they had ever experienced, and 23% said they would struggle to stay afloat if conditions persist.

QBE's business sentiment survey, which interviewed 410 firms, found that SMEs were under considerable pressure from continuing economic turbulence, with 9% saying that they would face bankruptcy.

The survey also highlighted several issues of growing concern to small firms in the industry as a result of the downturn, such as:

  • The increased cost of raw materials or fuel (52% concerned)
  • Shrinking sales (50%)
  • Credit issues (39%)
  • Competitors reducing prices (36%).

However, the results did suggest that the worst of the UK building sector's job cuts could be over – 32% of SME construction companies made staff redundant during 2008, but expectations for 2009 were more positive. Less than one in five, or 18%, expect to reduce staff this year.

But for those who have already been made redundant from the sector, there seems little hope of finding a new role in construction, with just 5% of SME construction companies expecting to recruit new staff.

Terry Whittaker, managing director for the UK sector at QBE European Operations, said: “SMEs in the UK are currently under a considerable amount of pressure because of the downturn and it is clear that the majority of SMEs in the construction industry are facing what they believe is an unprecedented time of economic difficulty.

“Although these challenging conditions are likely to continue for some time, it is encouraging that the sector's businesses are responding swiftly to these pressures and are implementing measures and considering options which could help mitigate business risks through into the upturn.”