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Growth stabilises but costs rise: Engineering services cautiously optimistic despite challenges 

The latest sector-wide Building Engineering Business Survey shows that sector growth remained steady in the second quarter of 2019 in the face of rising costs and persistent payment issues.

The survey, sponsored by Scolmore, which included data from industry trade bodies ECA, BESA, SELECT and SNIPEF, found that more than eight in 10 (81 per cent) businesses’ turnover remained the same or increased in Q2 2019 (versus Q1 2019). Less than a fifth (18 per cent) reported their turnover had decreased.

Outlook for Q3 suggests that the vast majority (85 per cent) of businesses expect more or the same turnover compared to Q2.

ECA CEO Steve Bratt commented: “Businesses are continuing to show resilience in what is a challenging commercial environment, with increased costs and poor payment ongoing concerns. With the uncertainty of the ongoing Brexit impasse casting a shadow over industry, it’s vital that the new Government injects some impetus by backing major infrastructure projects and ensuring prompt payment across the sector.”

More than half (52 per cent) of respondents reported an increase in labour costs, while two thirds (62 per cent) reported an increase in material costs.

Prompt payment remained a major challenge, with it taking over 30 days in 62 per cent of jobs in the public sector, in breach of regulations. This comes despite 56 per cent of businesses saying their clients promised below 30-day payment within contractual agreements.

BESA CEO David Frise commented: “It’s reassuring to see how resilient the industry is in spite of the current political situation, the continued scourge of late payments and the rising costs of labour and materials.

“The new Government must take heed that businesses are crying out for certainty. Until a clear consensus on what direction the country is heading emerges, this limbo will continue to hit investment and prevent us dealing with the other major challenges we face, such as climate change, air quality, improvements to the NHS and education and the housing crisis.”

The survey received 497 responses from companies across the multi-billion-pound industry, mainly regarding their performance in Q2 2019 (1 April to 30 June 2019), and expectations for Q3 2019.

Overall, the engineering services sector is estimated to account for some 40 per cent of UK construction and maintenance turnover.

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