DEMOLITION CHALLENGES
2020 A SURVEY BY DEMOLITIONNEWS.COM AND DEMOLITION MAGAZINE
Demolition challenges survey 2020 Our survey, which ran for the whole of December 2019, asked just one simple question: Which of the following, in your opinion, represents the greatest challenge to your demolition business going into 2020? (Please tick all that apply).
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Winning Work
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Profit Margins
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Cashflow/Late Payments
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Increased Competition
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Staff Recruitment/Staff Retention
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Rising Costs (fuel/insurance/staff/training)
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Exposure to Risk
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Increased Regulation
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Other
Respondents checking the “other option” were allowed to leave notes and comments. As respondents were allowed to check multiple boxes, the final results are not necessarily divisible by 100. Instead, the results show the percentage of respondents that checked each possible answer.
Background Honesty is the best policy, they say. So let me start with an honest confession. When I first uploaded our Demolition Challenges 2020 survey on the DemolitionNews.com website and across our various social media channels, I did so with pretty low expectations. We were nearing the end of what had been a not very good year for the demolition industry here in the UK; there had been far too many accidents; the political and economic outlook was feeling less than positive; and – frankly – I just wanted 2019 to be over. But within minutes of uploading the survey, it became clear that we had struck a chord; that there was a pent up demand within the industry to share their fears and their concerns for the year that lie ahead. We quickly changed the parameters of the survey to allow respondents to not just answer the single question we had laid before them, but also to leave comments. As we received responses from beyond UK borders, we set the survey to track the nation of origin of all the responses with the thought that we might need to present the findings on a country-by-country basis. We needn’t have bothered with that final tweak. Not only is demolition a world and a language unto itself, it seems that the challenges facing demolition
contractors are largely the same in Watford and Washington, Sunderland and Sao Paolo, London, Lisbon, Limerick and Los Angeles. By the time we closed the survey, we had received responses from 41 separate countries. The level of response from the UK was equivalent to more than four-fifths of all the demolition companies currently active in the country. We received hundreds more from the US.
So, over the coming pages, we will present you not just with the findings of the survey but also with some of the comments that accompanied the responses. While these findings are presented in an editorial style, it is important to note that these are NOT the thoughts of DemolitionNews.com. Rather, these are the thoughts of the global demolition industry.
Winning Work
43.5%
With almost half of all respondents selecting this option, the greatest challenge said to be facing demolition contractors in 2020 is actually winning work in the first place. But that simple answer did not tell the whole story. So, rather than just taking the figures as presented, we contacted a cross-section of those that were kind enough to leave their names so that we could find out more. This revealed a mixed bag of responses. Some were clearly concerned that the arrival of 2020 would see a downshift in demand and workloads that was beyond their control. Others expressed concerns about their own ability to win work in the face of stiff competition and increasing instances of price undercutting. There was a widely held belief that demolition contractors were facing increased competition, and not necessarily because of an influx of new demolition companies. The issue – apparently – stems from clients casting their net further afield for demolition solutions; accepting tender bids from a larger geographic area; hiring demolition companies from outside the region. Less surprising, perhaps, was the concern expressed by some respondents about competition from unqualified and largely unregulated competitors or –
as one respondent put it – “landscaping companies that think demolition is easy”. Clients hiring contractors from further afield, competition from unregulated competitors, and price undercutting are all fears normally expressed during periods of recession. Yet the UK construction (and, therefore, demolition) industry has just enjoyed a period of two years’ uninterrupted and unprecedented stability; while the US economy has enjoyed a shot in the arm (and a kick in the pants) during Donald Trump’s otherwise controversial presidency.
However, perhaps this tone is merely indicative of the timing of the survey. The launch of the survey coincided with a General Election in the UK that would also decide the “will they, won’t they” saga of Brexit once and for all. Meanwhile, President Trump was staring down the barrel of impeachment proceedings that might yet have a negative impact upon the US and, therefore, the global economy. While those recessionary-style concerns seem misplaced, their timing should not be overlooked.
Profit Margins
37.7%
Looking at the flash car and footballer lifestyles favoured by some demolition company principles, it is tempting to greet any concerns over shrinking profit margins with a cry of “the lady doth protest too much”. However, their concerns are valid, regardless of their choice of automobile. In the past 10 or 20 years, we have seen equipment costs escalate, insurance and fuel costs explode, and labour costs chart a course for the upper stratosphere. Yet, the amounts being charged for carrying out demolition works has remained largely unaltered in that same period. And while the economy has thankfully failed to adhere to its usual 10-year cycle of boom and bust, there is an entire generation of clients out there that have only known recessionary and post-recessionary prices. Yet concerns about profit margins speak to a wider truth than just stingy clients and rising insurance premiums. Those demolition companies that emerged – zombie-like – from the previous recession have seen their businesses regrow, expand and – in many instances – diversify. That recovery – welcome though it was – has come at a cost. Equipment run a little longer than usual during the worst days of the recession has since been replaced with shiny new kit with super-clean (and, therefore, more expensive) engines. A post-recessionary rise in demolition demand gave rise to an even more nomadic
workforce willing to change employer at the drop of the (hard) hat for another five pounds or five dollars a week. Stir into this heady mix the demolition industry’s second greatest enemy (after safety) – a seemingly universal willingness to undercut prices to win work, literally, at any cost – and the profit margin concerns expressed by well over a third of all respondents seems well founded.
Cash-flow/ Late Payments
36.2%
Concerns over late payments and the likely impact upon cash-flow will have come as no surprise to anyone. This was, after all, a year in which Build UK – a trade association comprising some of the UK’s largest construction and civil engineering companies – established a fair payment scheme to ensure that its members abided by strict payment guidelines. It is the same year that Build UK reported that NONE of its members abided by their own rules. It is a year in which we saw a mini excavator operator rampage through the reception area of a newly-built hotel because he hadn’t been paid. It was the year in which the issue of retentions stepped blinking into the public glare. And it was the year in which a leading UK demolition contractor said: “This is surely the only industry in the world in which you don’t know how much you are going to be paid until the cheque arrives”. The blame for late payments and the resulting cash-flow problems lies not with the demolition companies but with those they work for. But the demolition industry is not beyond reproach. Some (though not all) demolition companies are equally keen to hold onto any money that does eventually percolate down to them, subjecting their suppliers to the same plight as they themselves are forced to endure.
In addition, in an industry in which grudges between local rivals can last for generations, the demolition industry has an extraordinarily short memory when it comes to working for companies that are known late-payers. Rather than giving those tardy payers a wide berth, far too many in the industry will eagerly bid for work even though they know in advance that getting paid will be akin to extracting blood from the proverbial stone. Until the wider industry learns to walk away from those that will crucify it with queried costs, stalling tactics and late and even non-payment, cash-flow challenges look set to remain an integral part of the demolition sector.
Exposure to Risk
35.5%
There has been a creeping realisation within the demolition industry – certainly within the UK – that the balance between risk and reward has been shifting a little too much in favour of the former and away from the latter. And little wonder. Rightly or wrongly, there has been an on-going campaign to push responsibility upwards. Corporate Manslaughter legislation means that a company founder or director could be facing jail time for an accident or fatality that has taken place on a site they (the founder/director) may have never set foot upon. At the time of writing, an on-going probe into alleged collusion within the UK demolition industry carries with it the very real threat that one or more company founders or directors could find themselves struck off as directors because of price-fixing that may have occurred – quite possibly without their knowledge – between less senior directors and middle managers. The UK has already seen one company – Sloyan Doyle – walk away from the industry, the directors choosing retirement over the increasing risks associated with running a demolition company today. There are strong suggestions they may not be the last. Demolition men and women – by their very nature – are not naturally risk averse. For as long as demolition has been a form of employment, it has carried with it risks, hazards and dangers. For the
bold entrepreneur, however, those risks have traditionally been oset by potentially huge rewards. But the increase in financial and legislative risk in recent years has been accompanied by a marked stagnation or decrease in reward. Little wonder that respondents expressed their fears over their exposure to risk; little wonder that one company has already decided that the rewards no longer justify the risks; and little wonder that more demolition company founders are thought to be eyeing the exit and an early retirement rather than face an increasingly precarious future.
Staff Recruitment/Retention
34.9%
As you will see from the “other” section shortly, the demolition industry faces a double-whammy, with an ageing workforce heading for retirement at one end, and a failure to engage with and attract a younger replacement talent pool with which to replace them at the other. Furthermore, with demand greater in some regions than in others, and with the promise of stable and well-paid employment from major projects such as HS2 and Thames Tideway, some of the demolition industry’s number have chosen to jump ship, at least temporarily. Attempting to convince young people that operating an excavator is “just like using a PlayStation” has proven ineffective, primarily because using a PlayStation is not normally accompanied by pouring rain, mud, and the ever-present threat of unemployment. Furthermore, it does not address the wider employment issue. A demolition site involving 10 or 20 men and women might have just one or two excavator operators. Likening high reach excavator operation to a game of Call of Duty does not help fill the roles of general operatives, traffic marshals, banksmen, site supervisors, topmen, or a person to aim the dust suppression hose in roughly the right direction. And yet, that approach is not entirely wrong. A recent report suggests that 49 percent of roles in construction and demolition require certain digital
competencies from prospective candidates. The industry may have failed to convince young people that working in demolition is like a session on a games console, but perhaps it might convince those same young people that their skills with apps, tablet computers and social media could be highly valuable in this industry. None of this addresses the second staff-related issue identified by our survey – That of retaining staff. There is no secret sauce to resolving this issue, however. Well-rewarded staff that are looked after and who feel valued do not generally jump ship; and it is notable that some of the UK companies that have risen in both stature and influence in the past decade have done so off the back of a team that is vocal in its love for their employer.
The poaching of staff remains both a fear and a danger. But if this issue is to be overcome, the industry perhaps needs to look at why staff leave for a local rival rather than taking that local rival to task over its questionable recruitment practices.
Increased Competition
23.2%
There was a time when demolition contractors operated so locally that they knew their nearest rivals by sight and by name because – in all likelihood – they visited the same pubs and their children went to the same schools. That is no longer the case. Every demolition contractor is now a “national” contractor; and a London demolition firm might find itself competing against rival contractors from as far afield as Wales and Scotland. Contractors have long travelled in pursuit of work. But the current situation has been exacerbated by a client tender process which is the demolition equivalent of an open invitation. Despite their stated desire to minimise cost AND environmental impact, clients now think nothing of dragging a demolition contractor, their workforce and their equipment hundreds of miles to carry out a job that would surely be more practicable for a local company. And the perceived increase in competition comes not just from within but also from outside the demolition industry. With no operating license required in the UK and with clients all-too-willing to look the other way in order to obtain the lowest possible price, there is virtually no barrier to entry within the sector. As a result, we now have companies that claim to be plant hirers, rental fleet operators, used equipment sales outfits, and drilling and sawing specialists taking
on true demolition work, often competing against the demolition companies to whom they supply and sub-contract. The creation and implementation of a demolition license could overcome this issue pretty much overnight. But, for now, demolition companies can see their position threatened on all sides, a matter made worse by clients eschewing their responsibility to employ competent contractors and not just a landscaper with ready access to a digger.
Rising Costs
22.5%
From labour and wages to fuel and insurance, and from training to site security. Just about every facet of running a demolition business has risen sharply in price since the last recession was declared oďŹƒcially over. And this does not even begin to include the cost of the bureaucracy and red tape involved in bidding for and hopefully winning work. In an age when each demolition contract is accompanied by countless piles of paperwork to be completed and tick-boxes to be ticked, we find ourselves in a situation in which we are investing thousands of pounds (or dollars) in time and wages merely to be considered for a job that we may or may not win. An industry that is constantly pressured to get jobs across the finish line now finds itself in the unenviable position of having to pay handsomely merely to get to the start line.
Increased Regulation
17.4%
The very fact that some of the larger demolition companies now employ people and even whole departments merely to keep abreast of changes in legislation probably tells you all you need to know about the impact of regulation on an already heavily-regulated industry. Indeed, the legislative climate has given rise to the birth of a new breed of specialist consultants that exist purely to ingest, comprehend and interpret legislation to better help demolition companies navigate the shifting sands of the regulatory landscape. Despite our imminent departure from the regulatory clutches of Brussels and the European Union, this is a situation that seems unlikely to improve in favour of the demolition fraternity. Even as this is being written, there is widespread talk about the creation of a new building safety regulator and the injection of more (and much-needed) funding into the Health and Safety Executive in order to police it. The quantity, quality and stringency of regulation governing the demolition industry has already increased; and it shows no sign of slowing.
Other
14.2%
If I were a betting man – which, thankfully, I am not – I would have wagered that the term Brexit would have featured extensively through both the responses to our survey and in the corresponding comments. Yet this accounted for just 0.7 percent of all responses (although, admittedly, this is a very British issue that is of little or no consequence to US, Australian or New Zealand demolition contractors). By some considerable margin, the “other” category’s most popular response was a concern over – as one person put it – the “retirement of the industry’s old heads before suitable replacements have been found”. The explosive demolition sector has already suffered from this fate with the number of “young” blasters countable on the fingers of one hand. Without some fast action, the wider demolition industry – particularly in key areas such as high reach operators and topmen – could suffer the same fate. The industry has been suffering a skills shortage for as long as most of us can remember. It has been reported that the UK’s Construction Industry Training Board (CITB) has collected over £1.75 billion in levies over the past decade, while the National Demolition Training Group is sat on a mountainous pile of cash that is beyond the dreams of avarice. And yet, that skills crisis persists. And it could get a whole lot worse.
Regardless of the economic effect of Brexit, if the UK’s departure from the European Union makes the country less welcoming to migrant workers, we could be plunged overnight into a skills shortage the likes of which we have not seen since the cessation of hostilities after the Second World War. Although there were a handful of other fears and concerns expressed within this section – notably the rising instances of equipment and attachment theft – the other notable factor highlighted related, in various ways, to the demands of clients.
Some noted the tortuous process of bidding for work; others highlighted the unreliability of contract start dates; and many more cited the pressure placed upon them by clients to get demolition work completed so that “the real specialist contractors” could start work.
Conclusion Did the overall findings of this survey come as any surprise? Perhaps not. Did the strength of feeling expressed over the need to win work, falling margins, increased costs, sta loyalty and exposure to risk come as a shock? Certainly not. In fact, taking the findings of the survey as a whole merely serves to highlight the fact that very little has changed in the field of demolition. Indeed, with one or two notable exceptions, the responses given in 2019 would have been equally valid in 2009, 1999 and even 1989. There is no question that in terms of health and safety, environmental control and the equipment used to carry out demolition work in the 21st Century is streets ahead of all that has gone before. And yet, the challenges faced by the demolition men and women of today are largely the same as those faced years and even decades ago. This is partly explicable by the cyclical nature of the construction and demolition industry. It often feels that we have just managed to get prices up when another recession sweeps in and pushes those prices back down again. Increasingly stringent regulation has been a concern for more years than most of us care to remember; and sta switching employers for a few pounds more was
just as prevalent when they were doing so for an additional farthing. But there are aspects of these survey findings in which the demolition industry itself is at least partly culpable. A willingness to travel hundreds of miles for work merely to keep men and machines employed is not sustainable and surely undermines any claims of environmental awareness. A willingness to work for clients that have shafted them previously is to the industry’s detriment and merely serves to perpetuate a climate in which fair payment is paid little more than lip service. The industry skills shortage has been allowed to worsen, even while the coffers of the training providers have swollen and while working men have found themselves in the preposterous and unforgivable situation of being unable to afford the training they require and which their experience merits. As for the threat of competition from unregulated, unqualified, inexperienced and even downright incompetent contractors could be cured overnight by the adoption and policing of an independent demolition license scheme. This is a view that is - rightly - gathering pace and momentum; and not a moment too soon.
Sadly, such a move would require a degree of unity, focus and compromise that is currently lacking within the industry. Against that background, I fear that the findings of the 2020 edition of this survey – should we elect to carry it out – will be pretty much identical as those for 2019. So while the business of demolishing structures improves week on week and year upon year, the wider industry finds itself in a Groundhog Day in which it is still facing the same challenges today as those faced by their fathers and grandfathers in the last century.