Mark Robinson, group chief executive of SCAPE, explains how the industry can best support construction SMEs amid a slowdown in the sector
The upcoming pipeline of construction work is an important consideration for all contractors. However, a stagnating economy and the likely prospect of a UK-wide recession – albeit shallow – has made the issue ever more pressing around boardroom tables.
Indeed, two consecutive months of flat growth in sector output, according to the latest monthly figures from the ONS, show a construction industry struggling to muster momentum as commissioners pause spending decisions and the pipeline of work begins to slow.
The slowdown is of particular concern for construction SMEs, who are typically less well-resourced and, in some cases, haven’t previously experienced the full impacts of an economic downturn thanks to the level of support during Covid. So, what can the construction industry do to ensure that small businesses – and the economy – are well-supported?
Contractors and commissioning local authorities are responsible for supporting SMEs
Primary contractors and commissioning local authorities to have some significant responsibility when it comes to supporting SMEs across the UK – particularly when private sector investment is less forthcoming. Small businesses that grow often do so on the back of a secure new business pipeline, and tendering with certainty is key to maintaining a healthy balance sheet.
Those commissioning and delivering projects should therefore consider how they can engage local contractors in the early planning stages of projects and shape their projects in a way that encourages SMEs to tender. This might be through directly applying for work or aligning themselves with larger contractors.
Positively, making SME engagement a requirement for all public sector initiatives, no matter their size, is becoming the norm. There are several ways this is being done, but public sector construction and infrastructure projects offer a strong example of success.
Frameworks allow councils and commissioning authorities to procure contractors and specialists, which deliver quality, social value-driven projects at speed. Naturally, these projects require the support of sub-contractors, and local authorities can engage with local SMEs through their framework of choice to mandate local supply chains.
At SCAPE, for example, supporting local SMEs is a fixed requirement on all our frameworks, with primary contractors and their supply chains, in turn, making a positive impact on local economies and job creation. Last year, our partners recorded an 88.2% SME engagement rate, demonstrating what is possible when there is a clear focus on the local supply chain.
Support for construction SMEs from the new Procurement Bill
Further support for construction SMEs is coming from the new Procurement Bill currently passing through parliament. The Bill aims to simplify four complex laws, which have long been challenging for SMEs trying to win new work, into one.
As part of the overhaul, a new platform will be introduced to provide clearer visibility over pipelines of upcoming work and allow firms to break these opportunities down by their region and sector.
Mandatory targets for primary contractors and local authorities, and an overhaul of the procurement system, will no doubt help small firms sleep a little bit better at night, knowing there is a guaranteed pipeline of work for them to target.
However, this new regime isn’t expected to be effective until Spring 2024 at the earliest. So, in the meantime, a more basic, fundamental approach needs to be adopted to support smaller contractors: being good corporate citizens.
Payment times among primary contractors are gradually reducing. Still, we need to continue to ensure as an industry that suppliers are paid fairly and on time – a practice that often suffers during times of recession. SMEs form the lifeblood of local economies, and large firms will play a significant role in ensuring that small firms benefit from new work coming to the market by treating them as trusted, long-term partners.
So, the onus remains on larger firms and commissioning bodies to adopt the right attitude of promoting local companies and supporting regional economies. Efforts to stave off a recession and return to long-term growth will rely on this sort of mindset.
