Rising demand and skills shortage jeopardising engineering services industry

Electrotechnical businesses are growing more concerned about labour shortages amid the continuing economic squeeze, according to the latest engineering services industry survey.

The survey backed by leading trade bodies ECA, BESA, SELECT and SNIPEF, reveals while reported turnover figures indicate year on year growth, lump sum pricing, wage expectations and general inflation are negatively impacting growth.

Biggest concerns

Almost half (44 per cent) of all survey respondents said labour shortages were their current number one biggest concern for their businesses – up from 42 per cent in Q1 2023 and a third (32 per cent) in Q4 2022. Materials shortages and fixed pricing in light of inflation were ranked second and third-biggest concerns for business-owners, respectively.

Vacancies

A growing number of electrotechnical businesses have vacancies in their organisations – 57 per cent in the latest survey compared to just over half (54 per cent) in the previous survey, taken in April 2023. Of those with vacancies, over half (54 per cent) said they struggled with an insufficient supply of applicants to fill them.

Half (50 per cent) said applicants lack sufficient knowledge to do the job, and half (49 per cent) said applicants’ pay expectations were too high. Despite these findings, a significant number of contractors are expanding their directly employed workforce rather than choosing agency labour to plug the skills gap.

Rob Driscoll, ECA Director of Legal and Business, said: “Turnover doesn’t typically reduce when inflation is high. The real test is maintaining future order books and margins. As the vast majority of survey respondents are SMEs, I am heartened to see how switched-on our Members are despite a tough business environment. ECA remains ready to help its Members mitigate the risks of an uncertain economy.

“The lack of enough skilled workers jeopardises our sector’s recovery. It leaves the industry vulnerable in an uncertain market.”

Payment times

The survey also found that payment times have not improved for most respondents and remain unsatisfactory. Almost two thirds of respondents (57 per cent) said commercial clients/main contractors take 31-60 days to pay for work. A quarter (23 per cent) said they can take up to 90 days.

For public sector work, 43 per cent said they were paid 31 to 60 days after their projects, while one in 10 said they were paid up to 90 days after their projects.

Two thirds (66 per cent) of respondents said that between one and five per cent of their turnover is currently being held in retentions – a notable increase from an already worrying 53 per cent in January 2023.