A recently conducted survey by the Electrical Contractors’ Association (ECA) has shown that the electrical contracting sector has an extremely mixed outlook for next year, depending on business size.
The ECA Member Business Trends Survey is carried out on a quarterly basis, and findings from Q3 2011 show significant disparity between firms’ expectations for 2012.
Businesses with turnovers between £1m – £5m are facing next year with confidence, with 69% saying they expect business to ‘stay the same or improve’ over the next 12 months. The underlying confidence trend for businesses in this category has been steadily improving over the last five quarters. There is also some confidence for member businesses under £200k with 62% saying they expect business to ‘stay the same or improve’ over the next 12 months. However, firms with turnovers between £200,000 and £1m are notably more cautious, with 48% expecting business to decline in 2012.
Although many members reported low expectations in the short term for Q4 2011, in general the electrical contracting sector is looking to a more positive 2012. Member businesses in the Greater London, South East and Midlands regions saw an improvement in turnover in Q3 and are the most optimistic over both the next quarter and next 12 months.
Steve Bratt, group CEO of the ECA, said, “News that electrical contracting firms are looking to 2012 in a generally positive light is good news for the construction industry as a whole, as it demonstrates expectations of a steady project pipeline. However, the results should be treated with caution. The survey data was collected just before the government announced a significant slashing of Feed-in-Tariffs (FiTs), a major business area for the sector. It remains to be seen how the proposed halving of FiTs will affect business confidence in 2012.”
Bratt concluded, “Nearly half of firms with turnovers between £200,000 and £1m report lower expectations for 2012, which is a reflection of the challenges that SMEs face in getting paid for work, on time. Late payment is extremely damaging for firms of this size, and we hope that in 2012, the government will take serious steps towards enforcing fair payment across the industry.”
Only firms with turnovers less than £200,000 were slightly more optimistic about their turnover prospects for the next quarter than the rest of the sector.
All the other business size categories were pessimistic, with more of the sample expecting a decline in turnover for Q4. Businesses with turnovers of £200k-£1m had the worst expectations, with more than 50% expecting their turnover to decrease in Q4 – this is the worst level for two years.
Member businesses in the Greater London, South East and Midlands regions saw an improvement in turnover in Q3 and were the most optimistic over both the next quarter and next 12 months. The North and West are the least optimistic. (West includes West, South West and Wales, South East includes the South East and Central South regions, Midlands includes East and West Midlands).