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Coronavirus: Two thirds of construction firms take at least 20% hit on turnover

8 June 2020
Coronavirus: Two thirds of construction firms take at least 20% hit on turnover

Two thirds (67%) of construction businesses saw their turnover decline by at least 20% as a result of the coronavirus pandemic, with 40% reporting a decline of more than 50%.

That’s according to a new survey by the Office for National Statistics (ONS) on the business impact of covid-19, which was sent to around 20,000 businesses across the UK and covered the two-week period from 4 May to 17 May.

Nearly nine in 10 firms (89.9%) said they had applied for the government’s Coronavirus Job Retention Scheme – a figure surpassed only by arts, entertainment and recreation (91.8%) and accommodation and food service (97.1%).

Meanwhile, 19.7% of construction companies applied for a government-backed loan or finance agreement, and 16.4% applied for grants funded by the UK and devolved governments.

Construction businesses said that on average 53.8% of their workforces would return from furlough to their normal workplace within the next two weeks, although only 2.8% would return from homeworking.

Nonetheless, the sector has taken a major hit on turnover, with just 16% of businesses in the sector claiming that their turnover over the two weeks prior to the survey period had been unaffected. Only 1.3% of businesses said they had seen an increase in turnover.

The only sectors where a higher proportion of companies than construction reported a decrease in turnover of more than 50% were accommodation and food service (62.4%) and arts, entertainment and recreation (62.7%).

Cash reserves low

Worryingly, nearly a third (30.1%) of construction firms said their cash reserves would only last one to three months. Another 5.2% said they would last less than a month. Some 17.7% said they would last four to six months, 25.5% said they would last more than six months, and 3.6% said they had no cash reserves. Another 17.9% weren’t sure how long their cash reserves would last.

More than half (54.5%) of construction companies have deferred their VAT payments as a result of coronavirus crisis, while 22.6% have entered the HMRC Time to Pay scheme and 11.7% have taken a business rates holiday.

A total of 17.2% of construction businesses said they had increased the use of online services to communicate with their customers, while 62.8% said they were using online services more for internal communications and 19.5% had increased their use of social media for internal communication. However, nearly a third (30.3%) said they hadn’t increased the use of any online services.

Encouragingly, 42.9% of construction firms said they had been able to get the materials, goods and services they needed in the past two weeks, with 39.1% reporting that they had been able to obtain them but had to change suppliers or find alternatives. A further 15.3% said they hadn’t been able to access the materials, goods and services they needed.

Meanwhile, a majority (46%) of businesses reported that the prices of those goods and services had increased, compared to those who had seen an increase (24.5%). Another 10% said some prices had increased while some had decreased, while 16.9% weren’t sure.

Comments

The current lockdown has highlighted businesses lacking in good business practices. They have never done any analysis of product sales, customer margins, contract costs, etc. Whilst the monies came in every month the need to see where the profit was being generated seemed irrelevant. Now, however income really matters so it is important to know where the good business, high margins and good payers are and which ones to reconsider as costly resources need to be deployed efficiently. Changes are needed in their modus operandi and marketing needs to be targeted and not generalised, or in some cases none was done at all. Sales strategies are needed and different tactics employed. Some SMEs do not have any strategy and are unsure of where new business can be generated. They have poor communication with the sales teams and are failing to comprehend that a new approach will be needed to win business in the future. These businesses need help if they are going to survive as there is a new “normal” way of trading and they need to adapt to get back into the market.

Carole Rayner, 8 June 2020

Carole
Is spot on with her comments ,however most of the main contractors have only recovered from the last melt down 2008-2010 within the last five years .
The margin they work on is only between 5-10%. At bid stage with most of them having 10% overhead you won’t have to be a rocket scientist to understand that most medium to large contractors just keeping heads above water
Bidding process must change in UK .
Most SME ,s have cash flow issues due to not being paid on time and at present, I expect most clients main contractors are paying late because they need To hang onto cash .
When we come out of this the industry needs to improve how they operate going forward with lots of members of staff being able to multi -Task going forward Within business but The business models need to change in Industry for it to improve .

David Haskell, 9 June 2020