Bibby: Subcontractors failing to benefit from infrastructure growth
Over three quarters (78%) of UK subcontractors do not benefit from national projects, according to new research from specialist funder, Bibby Financial Services.
Findings of the Subcontracting Growth report dismiss the view that fiscal stimulus through large scale infrastructure projects has a direct multiplier effect on smaller construction firms throughout the country.
Helen Wheeler, managing director of construction finance at BFS, said: “Despite the sound of claxons coming from government each time a large scale infrastructure project is announced, it is clear that any benefits to the construction industry are swallowed up by the large and the few. Our research shows there are minimal signs of contracts and work trickling down to smaller businesses for these multi-billion pound projects.
“In recent years we have seen the Northern Powerhouse begin to take shape and in the last few months the go ahead for Hinkley Point and Heathrow’s third runway. What’s missing though is evidence that these projects are providing trade and jobs to a wider range of businesses throughout the construction industry.”
When considering opportunities to secure more work, over two fifths of subcontractors (45%) said commercial contracts were most beneficial to them, while a quarter (24%) highlighted housebuilding. Only four per cent of subcontractors felt that national infrastructure projects represented an opportunity to secure more work.
Peter Vinden, managing director of construction specialists The Vinden Partnership, said: “Small subcontractors are looking towards the commercial and residential sectors for work, but we must make the process of tendering and winning contracts for national infrastructure projects simpler and fairer. Without this, large scale projects such as the Midlands Engine and Hinkley point will fail to stimulate supply chains as they should.”
In March 2016, the government announced its National Infrastructure Delivery Plan, in which it compiled all national infrastructure plans. A key part of the plan surrounded improvements to the procurement process for national infrastructure projects, with a focus on levelling the playing field for both national and regional subcontractors.
According to the Subcontracting Growth report, almost a third of firms (31%) would like support in tendering for national contracts, marginally behind those who would like help with employment law and legislation.
Helen Wheeler added: “The new Chancellor has set-out the government’s economic stall by axing his predecessor’s deficit target in favour of a focus on fiscal stimulus, such as spending on homes and transport. Such fiscal measures are welcomed but our research shows that not all businesses in the construction supply chain are set to benefit. Subcontractors are crying out for support and, ahead of the Autumn Statement, the government should heed this warning and takes steps to address this issue.”
Focusing on the current pipeline of construction projects and their potential benefit to the industry, over half (52%) of subcontractors felt that local authority contracts presented the biggest benefit. Nearly a quarter (23%) said that the Northern Powerhouse would provide benefits to the sector. Hinkley Point, HS2 and South East airport expansion (21%) were also highlighted as key projects.