- Brexit remains the biggest threat of 2019, with larger firms the most concerned
- Subcontractors have a third less work in the pipeline now compared to 2018
- Two thirds of respondents say they haven’t taken any action to prepare for the UK’s departure from the EU
Subcontractors across the UK have struggled to stay optimistic amid the continuing uncertainty of Brexit, as well as structural concerns relating to their sector. In response, they are calling on the Government to act, according to a new study by leading financial services provider, Bibby Financial Services (BFS).
Findings of the Subcontracting Growth Report reveal that while competition between firms is increasing, subcontractors have 30% less work in the pipeline now than they did in 2018, an average decrease of eight weeks, from 27 to 19. However, the typical value of a new contract is higher in 2019, with subcontractors reporting an average contract value of £175,951, compared to £130,968 in 2018.
Brexit is still making firms nervous, with a quarter (25%) citing it as the biggest threat in the next 12 months. Despite the perceived threat, two thirds (66%) of respondents say they haven’t taken any action to prepare for the UK’s departure from the EU. Of those who have taken steps, the two most common actions taken were, holding back from from recruiting staff (17%) and building up company cash reserves (16%). A smaller number (9%) have also taken on contracts they would not normally have worked because of the decrease in demand.
Faced with these challenges, firms are going back to basics. When asked about the biggest opportunities in the next 12 months, the most common response was business as usual (13%), with fewer than one in ten (9%) optimistic about new larger contracts.
Helen Wheeler, Managing Director of Construction at BFS, commented: “It’s been a tough year for the subcontracting sector, with the industry reeling from the collapse of two large high-profile contractors – and further impacted by the recent announcements regarding British Steel. It is perhaps no surprise that firms are focusing on safe routes to revenue, but they cannot lose sight of their potential. Government has an important role to play in reassuring subcontractors that it’s safe to be ambitious, to invest in growth and to compete for larger contracts.”
Research findings highlighted the need for action, with most subcontractors (89%) calling on the Government to restore confidence. Late payments remain high on the agenda with nearly three quarters (74%) pushing for compulsory adherence to the Prompt Payment Code. Additionally, 62% of firms want the Government to use their spending power to increase competition, asking for a greater distribution of large contracts to a more varied pool of subcontractors. Over half (55%) remain committed to a tariff free trading relationship within the EU.
Helen Wheeler continued: “The sector has moved from a period of struggle into a period of uncertainty. Brexit, the dominance of large contractors and late payment problems are all acting as brakes on the sector. If subcontractors are going to reach their full economic potential then there needs to be a seismic shift in the way contractors work with subcontractors.”