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Market Analysis

Engineering service firms brace for halving of turnover

Open-access content Thursday 28th May 2020 — updated 2.29pm, Monday 15th June 2020
Authors
Martin Read
web_engineer_iStock-636637292.png

A survey of engineering services firms, conducted by engineering firms’ trade association ECA over a three week period concluding on 7th May, reveals a sector expecting a significant fall in turnover for the second quarter of 2020.

73 per cent of those surveyed expected their turnover to fall in the second quarter of 2020, compared to the first quarter, with almost one in four (23 per cent) expecting that by the third quarter of this year they will experience a fall in turnover of 50 per cent or more compared to 2019 trading.

The figures represent the biggest ever anticipated drop in turnover since the survey was first conducted more than a decade ago. One in 20 respondents (five per cent) reported that by the end of Q3 this year, their business ‘may not be viable’, while a further 10 per cent said they were unsure about viability.

Despite this gloomy outlook, 15 per cent of respondents said they expected their businesses to grow by the end of Q3, while 70 per cent expected their businesses to remain viable.

ECA director of legal and business Rob Driscoll said:

“Given the cliff edge drop in work since COVID-19 hit the UK and the safety measures required for business continuity, the negative impact on productivity rates in engineering services is unsurprising.

“However, the sector’s unique position within both construction and facilities management has always demonstrated a resilient ability to bounce back. ECA is perfectly positioned to provide a plethora of knowledge, tools and support to enable contractors to weather the economic storm of the coronavirus.”

Debbie Petford, BESA’s director of legal & commercial, added:

“These statistics show the unprecedented damage that this crisis has inflicted on our sector. Despite so many businesses struggling to survive through no fault of their own, it is encouraging to see how resilient the vast majority of the sector is.”

“It is critical businesses work together in a collaborative spirit with their supply chain, and it is encouraging to see these principles reflected in the new CLC Contractual Best Practice Guidance and the RICS Conflict Avoidance Pledge, proving the industry can work together in these challenging times.”

By the end of Q3, half of the businesses surveyed expected to retain broadly the same number of direct employees as they had immediately prior to the coronavirus outbreak, with two-thirds of businesses (67 per cent) expecting wages to remain broadly the same. 17 per cent expected wages to fall.

The survey is based on 431 responses from companies across the multi-billion-pound industry, mainly regarding their performance in Q3 2019 (1 July to 30 September 2019), and expectations for Q4 2019.

Image credit | iStock
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