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Confidence rises despite higher costs

UK: Building services companies remain confident despite higher labour and material costs.

The latest sector-wide Building Engineering Business Survey shows that the sector appears to be showing signs of recovery after a challenging 2018.

75% of businesses surveyed said their turnover had increased or remained steady in Q1 2019, compared to the previous quarter. The outlook for Q2 2019 is also largely positive, with almost 29% of businesses estimating their turnover will increase.

However, costs continue to rise, with 58% of businesses reporting higher labour costs in Q1 2019 compared to Q4 2018, and 73% saw higher materials costs.

Payment terms and retentions remain largely unfavourable for the sector. For commercial work, 81% said the typical number of days to be paid for a project or job was 31 days or more. For public sector work 63% of businesses said the typical number of days to be paid for a project or job was 31 days or more. 58% of businesses had between 1% and 10% of their turnover tied up in retentions in Q1 2019.

BESA CEO David Frise said he was encouraged to see confidence returning, but added: “However, the trend in higher labour costs will not be eased until, as a sector, we address our widening skills gap. This illustrates the increasingly critical need to encourage young people into the industry via apprenticeships.”

The survey receives input from the Building Engineering Services Association (BESA), the Electrical Contractors’ Association (ECA), the Scottish electrical trade body SELECT and the Scottish & Northern Ireland Plumbing Employers Federation (SNIPEF).

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