A panel discussion at the Electrical Contractors’ Association’s (ECA) entitled ‘Surviving the Recovery’ saw firm agreement that ‘the industry must modernise to survive and grow’.
Chaired by Peter Hansford, the Government’s Chief Construction Advisor, the panel included Brian Berry, chief executive of the Federation of Master Builders; Martin Bailey, chief innovation officer at NG Bailey; John Mead, partner at Gardiner and Theobald, Noble Francis, Construction Products Association economics director, and Paul Reeve, ECA director of Business Services.
Margins, payment, contracts, and skills, were highlighted as the four areas needing modernisation, as the panel discussed how the industry’s current approach is ‘impacting on profits and holding companies back from investing’. Noble Francis said: “There is a fundamental long-term problem with the business model in construction. Because the obsession is with cost, not value, profit margins in the good years are only 2-3 per cent – that’s just not big enough.”
Paul Reeve agreed, saying: “The astonishingly low margins in the M&E sector hamper investment in the necessary skill base, equipment, and other resources. However, the real issue during recovery will be ensuring cash flow, and if we don’t sort this out then margins becomes academic.”
The panel also agreed that a ‘fair payment’ culture is vital, and that more needed doing be done to encourage and incentivise companies, and especially smaller businesses, to take on apprentices.
Brian Berry commented: “During the last recession, in the early 1990s, we lost about half a million people, and now we’re up to almost the same figure. The problem is where will the skills come from this time? There’s no shortage of young people wanting to go into the building industry, but there is certainly a shortage of SME employers able to take them on. We’ve got to incentivise small companies.”
Martin Bailey added: “As an industry, we’ve got to get skills right; we need to be flexible. Very importantly, what we’ve lost in our industry is – and we’ve got a great four-year apprenticeship – effective training for people after their apprenticeships. We need to continue bringing in the new skills, but we need to keep retraining and upskilling.”
Paul Reeve concluded by saying: “As an industry, we need to stay focused on solutions and be positive. We need to see a real change in how the industry carries out business – notably a shift in attitudes to working together, margins, payment and contracts, as well as putting a real focus on skills. The whole supply chain is going to need proper cash flow and not just more, but new, skills if we’re going to survive the recovery and fulfil our potential.”
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