INDUSTRY COMMENT FEATURE
Are the green shoots finally having a growth spurt?
Electrical Contractors’ Association (ECA) group CEO Steve Bratt considers some of the measures that need to be taken to give the UK a chance of a real economic recovery
T
he UK’s gross domestic product grew by 0.8% from July to September
2013 compared with the previous quarter, and a subsequently revised estimated annual growth rate up from 1.5% to 1.9%. Coupled with construction industry growth of 2.5% over the same period, representing a year on year rise of 4.9% and a 15% contribution to GDP growth, could we be forgiven for thinking that the economy has finally turned a corner? The short answer is probably yes, but it’s important to look at what is fuelling the growth, and whether it can be sustained.
INFRASTRUCTURE NEEDS House building, backed by government initiatives such as the Help to Buy Scheme, seems to be largely responsible. Growth is also being bolstered by spend on large infrastructure projects such as Crossrail. Establishing some certainty around infrastructure projects would be a very good thing. If a way could be found for infrastructure to be viewed strategically, and to transcend party politics, that would surely save us from having to secure last minute power generation deals, or debate over and over again projects such as HS2? Progress in this regard may lie in the
Armitt Review, undertaken by Sir John Armitt, former CEO of Network Rail and chairman of the Olympic Development
Authority. Recently published, it recommends that a cross-party National Infrastructure Commission be established, with a remit to identify infrastructure needs for the next 25 years and to agree, through cross-parliamentary consensus, ten year sector delivery plans which the commission would monitor. I just hope that something comes of this
- we know how important infrastructure is in attracting inward investment in the UK as well as its importance to the construction sector. The UK is currently rated 28th in the world for the quality of its infrastructure. We would, therefore, no doubt all benefit hugely from the stability that a development like this might bring, in terms of growth, cost efficiency, skills planning and so on.
SUCCESSFUL SMEs What else would secure the positive changes in the economy? To my mind, it’s successful SMEs - ones that can grow by taking on apprentices and other staff, buying new equipment and diversifying their businesses. To do this, SMEs need to move beyond simply staying afloat and trade with confidence. That means getting paid promptly and fairly. At the time of writing, more than £30bn in overdue payments is owed to UK SMEs, which is simply outrageous. Thankfully, however,
David Cameron has finally joined the long list of politicians acknowledging that things must change and has launched a government consultation on the issue. We have told government that the current Prompt Payment Code (PPC) is not working; that we need a payment ombudsman; that the central government payment arrangement for Tier 1 contractors should be driven down the supply chain; that the current trend to extend
payment terms should be stopped and the EU Late Payment of
Above: Steve Bratt, CEO of the ECA
Top right and below: house building, backed by government initiatives such as the Help to Buy Scheme, seems to be largely responsible for the UK’s recent growth
Commercial Debt Regulations strongly enforced; that Project Bank accounts should be widely adopted and much more. We have the Construction Leadership Council looking at the issue, and Lord Young’s report on helping SMEs, as well as a proposed Construction Fair Payment Charter. However, is anything really going to happen? Earlier this year, we used the results
of our ECA member survey to persuade construction minister, Michael Fallon MP, that action is necessary. We met him with SME members to outline why late payment is so damaging. And, on a very positive note, were heartened to see that as a result of our lobbying work, the government announced its intention to require main contractors on public works to pass on payment terms within 30 days. Following this policy shift, we’re now asking government how this fits in with the fair payment charter. Let’s hope something constructive
comes from all this attention, and poor payment practices are left behind, along with the recession.
ECA
www.eca.org T: 0207 313 4800
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