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Engineering services sector looks to ‘hold on’ through coronavirus storm

A new engineering services sector survey shows that three-quarters of businesses (73 per cent) expect their turnover to fall in the second quarter of 2020, compared to the first quarter.

Looking further ahead to the third quarter of 2020, a similar number of businesses expect turnover to fall (compared to the start of February 2020 – selected as a reference point before significant coronavirus impact). Of these, almost one in four businesses (23 per cent) expect a fall in turnover of 50 per cent or more.

These figures are the biggest ever anticipated drop in turnover since the sector business survey began, over a decade ago. One in 20 respondents (five per cent) reported that by the end of Q3 this year, their business ‘may not be viable’, while a further 10 per cent said they were unsure about viability.

In the current circumstances, many potential survey respondents may have been on furlough, restricted from working or not trading. However, a remarkable 15 per cent of respondents said they expect their businesses to grow by the end of Q3, with a further 70 per cent expecting their businesses to be viable, with turnover either reducing or holding on.

ECA CEO Steve Bratt said: “Although construction has continued to operate through the crisis, at least in part, it is no surprise to see the reductions in turnover and the challenges to business in remaining viable.  However, the figures also demonstrate our sectors resilience and importance and we shouldn’t forget that in the medium and longer term many of the challenges we face as a nation will provide growth opportunities.”

In terms of the impact on jobs at the end of Q3 (compared to the start of February), half of businesses who responded expect to have the broadly same number of direct employees. Furthermore, two-thirds of businesses (67 per cent) expect wages to be broadly the same, although 17 per cent expect wages to fall.

BESA Director of Legal & Commercial Debbie Petford said: “These statistics show the unprecedented damage that this crisis has inflicted on our sector. Despite so many businesses struggling to survive through no fault of their own, it is encouraging to see how resilient the vast majority of the sector is.

“Government have demonstrated its continued support for businesses throughout this crisis and this should be complimented by industry playing its part too. It is critical businesses work together in a collaborative spirit with their supply chain, and it is encouraging to see these principles reflected in the new CLC Contractual Best Practice Guidance and the RICS Conflict Avoidance Pledge, proving the industry can work together in these challenging times.”

However, the use of subcontractors has fallen in the short term, and employers expect this to continue. In Q1 of this year, some 22 per cent of respondents said they were using fewer subcontractors than in Q4 2019. Looking ahead, 61 per cent of businesses using subcontractors expect to use less at the end of Q3, compared to the start of February.

The survey received 431 responses from companies across the multi-billion-pound industry, mainly regarding their performance in Q3 2019 (1 July to 30 September 2019), and expectations for Q4 2019.

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