The UK engineering services sector is experiencing a period of mixed fortunes, according to the most recent survey from the ECA, BESA, SELECT, and SNIPEF.
Unsurprisingly, the sector is still experiencing a shortage of skilled workers, a key fact that has been highlighted in previous surveys. Despite the skills shortage, however, electrotechnical businesses have reported a notable increase in activity and order bookers – which should bode well for future performance.
The survey highlights that 40% of participants observed an increase in their business turnover in the last quarter of 2023. However, a significant portion, 34%, identify staff shortages as the principal threat to their business, with expectations that business growth could stagnate in 2024.
Payment delays are another notable issue, with the majority of respondents citing extended payment times from commercial clients and main contractors, ranging from 31 to 90 days. Similarly, public sector payment times also extend up to 90 days for some. Additionally, 60% of those surveyed indicated that 1 to 10% of their turnover is currently tied up in retentions.
The survey underscores ongoing efforts by the ECA to advocate for fairer payment practices for contractors. Recent legislative proposals, influenced by ECA’s advocacy, aim to amend the Reporting on Payment Practices and Performance Regulations, extending the regulations until April 6, 2031 and introducing new reporting metrics for large companies from January 1, 2025.
Despite these challenges, the UK’s green economy shows promising growth, with a 9% increase in 2023, reaching approximately £74 billion. The sector’s commitment to supporting the transition to net-zero carbon emissions is viewed as crucial for the broader construction industry’s return to growth.
Rob Driscoll, ECA Director of Legal and Business, commented, “In light of the wider economic slowdown, these latest survey figures are far from surprising. However, they offer some vindication for the hard work ECA has been doing to give electrotechnical and engineering services contractors a voice, and the opportunity to play their part in the nation’s economic recovery.
“While the outlook for the sector is pessimistic for the rest of 2024, there are signs that the economy could turn a corner by 2025 and the sector could return to growth.
“The challenge is attracting and retaining talent of a highly skilled workforce during the intervening period where commercial behaviour hardens in order to meet growing demand for more advanced low-carbon solutions like solar panels, electric car chargers and heat pumps.”
Debbie Petford, BESA Director of Legal and Commercial, added, “Contractors face a tough combination of economic and legislative challenges that are clearly hampering short-term growth, but the longer-term picture is more promising. The need for high quality building engineering services is more pressing than ever because of the UK’s legal obligation to cut carbon emissions and mitigate the worst impacts of climate change.
“On top of that we have the biggest change to building safety regulations in a generation radically changing the way firms operate. All of this is ramping up pressure on already hard-pressed workforces, and reinforces the importance of investing in recruitment and retention of skilled people able to work with the latest technologies – including rapidly evolving digital systems – to improve our productivity and prepare to meet future demand for our sector’s expertise.”
