West Midlands construction SMEs struggling to cope, survey says

A MAJOR survey of  smaller regional contractors has painted a picture of a sector in which it is difficult to win new work and to get paid promptly for work already completed.

The survey from Constructionline – a pre-qualification certification scheme for contractors and consultants – questioned 115 SME contractors and revealed that 54 per cent of them have seen a decrease in their workload in the last three month.

The same percentage say payment terms have lengthened over the same period while 43 per cent say the biggest challenge they face is winning work.

Small building firms have also accused potential clients of not being helpful enough during the tender process with 69 per cent stating that they are unsupportive. Nearly half (49 per cent) said they could help by providing more information about the tendering process.

Seonaid Culliford, Constructionline’s client relationship manager for the West Midlands and South Wales, said: “With workloads dropping many companies need all the help they can get to ensure they survive but instead subcontractors at the tail end of supply chains are facing cashflow worries as payment terms lengthen.

“More has to be done to regulate firms in both the public and private sectors to ensure SMEs aren’t bearing the full-brunt of the economic downturn.”

Birmingham construction firm O’Donnell Developments went under recently after 21 years in business.

The Stechford-based firm was a concrete and groundwork contractor and had been working on phase two of the Aston University Student Village Complex in central Birmingham when it ran into cashflow problems.

A spokesman for the firm told TheBusinessDesk.com that although it had a full order book it was forced into administration because of the length of time it was taking to be paid for work it had already done as a sub-contractor.

Meanwhile, Rugby-based construction and civil engineering company Stepnell has called on the Government to do more business with smaller industry players.

Speaking at a recent Cabinet Office briefing of more than 100 senior Government procurement officials and small business leaders, Stepnell’s managing director Mark Wakeford said that public sector procurement was continuing to frustrate construction industry SMEs.

“SMEs account for 50 per cent of GDP yet we still struggle to get on the tender list of public sector projects because these opportunities are not widely publicised or made accessible and affordable to the SME community to compete for,” he said.

“We need to debunk public sector perceptions of SMEs being too small to do the job when in fact many employ up to 250 staff and have significant experience and expertise in delivering large, complex construction projects – from PFI schemes to schools and hospitals.”

Stepnell wants to see Government construction projects being awarded on a more proportional and fair basis to appropriately sized companies and expensive bidding processes, red tape, and disproportionate eligibility requirements removed.

“We’re seeing big companies travelling large distances to do small public sector projects which are unlikely to deliver good value,” he said.

“Complex and unnecessary pre-qualifications are also making these contracts less accessible to smaller construction companies. This is not only stifling competition and innovation, but putting the long-term survival of SMEs – the lifeblood of our economy – in peril.”