state of the demolition nation 9
T h e S tat e o f t h e D e m o l i t i o n N at i o n
State of the Demolition Nation The sector also lost a few companies along the way, with Armoury Demolition and Controlled Group among the more notable victims.
As the UK demolition industry finally shows signs of shaking off the recessionary shackles, Demolition magazine and Demolition-Jobs.co.uk commissioned an exclusive study to gauge prospects for the year ahead. Mark Anthony delivers the mixed messages.
But in some parts of the country, the green shoots of recovery – long feared dead - have begun to poke their head above the ground. Workloads are on the rise in selected geographic pockets; and many companies are once again on the recruitment drive, looking to replace the employees lost when the recession first struck in readiness for a long overdue upturn. Against that background, Demolition magazine joined forces with leading industry recruitment portal Demolition-Jobs.co.uk to commission an independent market research study to gauge the industry’s confidence as it heads into 2014.
There have been times, over the past five years, when it seemed that the recession actually was an all-consuming bottomless pit of despair. Although landmark projects like the London 2012 Olympics provided some respite, the industry saw workloads plummet, margins slashed and employment levels fall.
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What follows then is the details of that study. We have used the respondents own words throughout, although each respondent was assured of their anonymity.
Over a six-week period, the research team spoke to a number of demolition companies of all shapes, sizes and affiliations up and down the country, and the findings were every bit as varied as the companies themselves. The study focused upon five key questions: • Was 2013 better/worse/the same as 2012? • Are you expecting 2014 to be better/worse/the same as 2013? • What factors might boost prospects for 2014? • What is likely to be your biggest obstacle in 2014? • Will you be employing more/less/the same number of staff in 2014?
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Prompted by the feedback on these questions, we then conducted a smaller and less scientific study to analyse the key costs facing demolition contractors today and how they vary across the length and breadth of the country. The findings of that study are presented separately on Page 00 under the Postcode Lottery headline.
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That the main study highlighted a perceived North/South divide will be a surprise to no-one.
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The fact that at least one specific part of the South sees 2014 as a continuation of the downturn might surprise everyone.
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01902 686363 www.demolishdismantle.co.uk www.demolitiontraining.com john.woodward@demolishdismantle.co.uk jill@demolishdismantle.co.uk
LOOKING FOR WORK? 11
T h e S tat e o f t h e D e m o l i t i o n N at i o n
2012 to 2013 When the recession struck in 2008, confidence fell lemming-like off a cliff and new work opportunities nosedived. Sadly, the climb back to normality is proving to be just that; a slow and often painful ascent.
“2013 was better than 2012 but, frankly, it couldn’t have been much worse”
When the recession struck in 2008, confidence fell lemming-like off a cliff and new work opportunities nosedived. Sadly, the climb back to normality is proving to be just that; a slow and often painful ascent. However, a good number of regions – notably the Midlands, South East and Scotland – report that 2013 showed a marked improvement over 2012. But these headlines do not tell the full story. Far more telling are the comments from respondents: “The Olympics hangover lasted much longer than we anticipated. As a result, 2013 was only marginally better than 2012. But the market is still improving,” said one Londonbased respondent.
“Work has picked up since May but, prior to that, it was the worst winter we have ever had to endure,” said an East Anglian respondent.
“2013 was much better than 2012. There are bigger and more complex jobs available. We are feeling much more confident” While the feedback from the various regions varied – often wildly – there was one unifying theme that is best summed up by a Hertfordshire-based respondent. “Turnover is up, but profit it not. Margins are still extremely tight.” It is notable, also, that only two regions – Cheshire and Kent – claimed that 2013 was actually worse than 2012. What makes this feedback even more remarkable is that feedback from neighbouring territories – Manchester and Surrey respectively – reported an upturn.
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2013 to 2014 By the time you read this, New Year’s Eve and the dawning of 2014 will be approximately a month away. For many of the respondents, that is expected to signal a further improvement in their prospects.
“Since the middle of the year, we have really hit the ground “Hopefully, we can maintain re is no sign that the status quo but I fear that running and theng to slow” t is goi 2014 will actually be worse” The mosttha upbeat response, however, came from a
But in several key areas – notably Kent, Yorkshire &East Anglia - such positivity remains in relatively short supply.
““We are planning for 2014 to be worse. There is more activity out there but only in terms of tenders; not in actual work,” said a Kent respondent. “There is potential for 2014 to be better than 2013. But even during the recession, our operating costs for things like fuel and insurance have continued to rise. So even if we see a sharp upturn in workloads, our profits are still likely to be down to a level we saw five years ago,” said one person in East Anglia. But it’s not all bad news; far from it in fact. “2014 is already looking promising. There’s much more activity in the marketplace and we don’t need to win all of it for 2014 to be a good year,” said one Midlands-based respondent.
London-based respondent. “2014 has the potential to be a record year for us. We are investing already to make sure we’re ready to match the demand.”
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T h e S tat e o f t h e D e m o l i t i o n N at i o n
The Boosters On our first two questions, the answers were as varied and disparate as the respondents. But on the question of what is likely to boost activity in 2014, the industry came together as one with a resounding and almost unanimous answer: Housing. The shortage of affordable housing in the UK has been a challenge for about as long as anyone can recall. And for all the initiatives and schemes set in place by successive Governments, the UK’s need for around a quarter of a million new homes each year remains little more than a pipe dream. But with the threat of the next General Election now on the horizon, the current coalition Government has identified housing as a potential vote winner and has acted accordingly with a number of schemes designed to boost activity in the sector. According to the latest figures from the National House Building Council, new home registrations in the UK have risen by 25 percent for the year up to and including August. The figures show continued improvement around the country compared to the same period in 2012. In total 90,730 new homes have been registered in the first eight months of 2013, compared to 72,740 last year over this period. The increase in registrations over the course of the year compared to 2012 are said to be proof of how various Government initiatives, such as the Help to Buy scheme, have helped in the delivery of new homes across the UK.
This news will be music to the ears to the numerous respondents that highlighted housing as the key to their prosperity in 2014 and beyond:
to lp e H e th m o fr ce n e d fi n co “The the st o o b lp e h l il w ve ti ia it in Buy hole construction market as a wtion,” and that is good for demoli “There are great signs within the housing market. Some major developers are back in the market and that helps everyone,” said one London respondent.
“Providing interest rates stay the same and the Bank of England doesn't do anything crazy then things will improve.” Interestingly, a number of respondents cited an increase in Government spending as key to their own recovery. This runs counter to the wishes of Chancellor George Osborne who has long stated that he wants private finance rather than public funding to buy the UK out of recession.
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But he too remains cautious. “In truth, there is evidence to suggest that we are now fast approaching what might be called a norm in demand. 2008 levels were unrealistic and unsustainable; and while I am sure there are large parts of the industry that would dearly like a bit more work and a lot more profit, my guess is that current levels of demand will become the new status quo.”
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And while for some time that sounded like empty rhetoric for “the cupboard is bare”, statistics from leading market intelligence provider The Builders Conference suggest that Osborne’s prayers have been answered.
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“The Government’s desire for the private sector to lead the industry out of recession has finally become a reality with privately-funded projects outstripping publicfunded contracts for the first time in a long while,” said The Builders Conference CEO Neil Edwards at the end of August.
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LOOKING FOR EMPLOYEES? 15
T h e S tat e o f t h e D e m o l i t i o n N at i o n
The Barriers If housing and private finance are the demolition industry’s ladders, then bureaucracy, over-regulation, suicidal bidding, cowboy contractors and a skills shortage are the snakes highlighted by the survey. “There is more and more paperwork year on year and that slows everything down and contributes to dwindling margins. There is a major problem in the industry with companies placing suicide bids. They devalue the entire market and drive prices down.
make o t e p o h r e v e “How can we y when there is proper mone ne out there always someo for nothing” willing to work “There are lots of different qualifications and there is a high cost involved with this. But there’s no extra money on jobs to subsidise the increasing costs,” said a respondent in the North West. “The training qualifications that each industry body want us to get comes at a huge cost to achieve and maintain, and the goal posts are constantly moving. Something more universal or standardised would be beneficial and would save on costs,” commented a Surrey-based respondent. While these respondents highlighted the issue of training, several cited the lack of suitable workers to even undergo the relevant upskilling.
“There are not enough skil and experienced people co led into the industry. Our workming force isn't getting any younger.” “Insurance is always an issue, and buying the right policy cover is very expensive. Employment legislation is geared towards employees and it’s very difficult to do anything about it,” said a Midlands respondent. That view was echoed by a respondent in East Anglia. “Employment law has removed our flexibility. We used to be able to expand and reduce staff levels as workloads dictated. But there has been a tightening up of work laws. You can no longer hire and fire as needed.” A number of companies cited rising fuel costs and a continued lack of bank lending as a potential stumbling block. But the overall concerns for 2014 were, perhaps, best summed up by a respondent from the North East. “It’s the same problems as usual. Higher costs for training, fuel, insurance, landfill and Federation membership. At the same time, we are competing against companies that cut corners yet continue to win work from supposedly reputable and safety conscious clients.”
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Jobs for the Boys Demolition-Jobs.co.uk was created in 2008 in an effort to help newly laid-off demolition workers back into employment within the industry The website has since helped a huge number of people into new jobs in the UK and – rather more surprisingly – in New Zealand, Australia and the US. But, for all its best and altruistic efforts (unemployed workers can advertise their availability to work free of charge), it could not prevent an industry-wide brain drain that saw demolition lose experienced and trained staff in their droves. So with prospects now looking up in most parts of the UK, are we set to see an upsurge in employment levels? Well, with the notable and unlikely exception of Kent, London and the South East is set to retain its reputation as the employment hot bed well into the New Year while key geographic areas such as Scotland and the Midlands reported plans to rationalise. “We are employing a lot more staff in readiness for 2014,” said one upbeat London respondent.
That view was balanced by another respondent from the capital who said: “We grew last year from 35 to 40 staff so we will look to maintain that.”
rrent u c e h t d e in a t in a “Having m , we 9 0 0 2 e c in s f f a t s f amount o ge.” n a h c o t g in n n la p are not A note of caution was sounded by an East Anglian respondent: “It’s just too unpredictable to tell at the moment. We would like to retain our current staff levels but we just can’t be sure.”
“We’re trying to r we have but if aetain the staff then we won't b nyone leaves e in a rush to replace them.”
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T h e S tat e o f t h e D e m o l i t i o n N at i o n
Conclusions Attempting to get a consensus of opinion from 100+ respondents – each with their own specific challenges and concerns – was akin to herding cats. And, at the end of the day, what is true for a contractor in London might be utter nonsense to a contractor plying his trade in Newcastle. Equally, the employment challenges faced by some outlying regions will barely cause a blip in the worker magnet of London and the South East. But there are some findings that are largely representative: l 2013 was generally better than 2012 l 2014 is expected to be better than 2013 in most (but not all) areas l Fuel, insurance, employment and training costs continue to be a major cause for concern l Cowboy contractors, bid undercutting and constantly changing training and qualification standards are, perhaps, the greatest source of industry frustration l The industry is still struggling to attract skilled workers and to maintain those that it has Unfortunately, there is no quick-fix to what ails the UK demolition business. Indeed, there are some aspects of the modern demolition sector that are a doublewhammy and vicious circle all rolled into one.
Take, for example, the issues of insurance, training and cowboy contractors; three seemingly disparate elements of the business but all interlinked to ultimately make life more difficult for the reputable demolition contractor. A contractor is struggling, chooses not to train his staff and, with lower overheads, wins a contract against a reputable competitor. As a result, there is an accident or, worse, a fatality. The insurance industry responds by driving up premiums for the demolition industry. And so the reputable contractor not only lost the job, he is now being penalised financially for the inadequacies and shortcomings of the contractor that stole the contract in the first place! Until clients recognise the difference between a demolition contractor and a man with access to an excavator and a hard hat (or are forced to do so via legislation), these frustrations will fester and grow and the UK demolition industry will remain trapped in the boom/bust cycle that has typified the sector for as long as most of us can remember. Sadly, if our survey and the comments from respondents up and down the country are to be believed, the industry’s fate rests very much in the hands of just about everyone except the industry itself.
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T h e S tat e o f t h e D e m o l i t i o n N at i o n
Postcode Lottery What you pay for labour, fuel and to dump waste could be markedly different depending upon your location. Mark Anthony conducts a straw poll and finds that the perceived North/South divide might be more than just a perception. One of the unforeseen bi-products of the Demolition/Demolition-Jobs market perception survey was the perceived differences between individual parts of the UK. While major landmark projects like the London 2012 Olympics unquestionably favoured London and the South East, the increasingly nomadic nature of the demolition business should have allowed contractors from further afield to benefit from this and other opportunities.
The three key costs that we focused upon were: • A qualified 360 excavator operator per day • Waste disposal per tonne • Fuel per litre
So does the North/South divide still exist? We decided to take a closer look at some of the key costs facing demolition contractors up and down the country. And the straw poll findings – although by no means scientific – certainly suggest a marked difference based upon geographic location.
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Although qualifications and working hours might fluctuate from region to region and job to job, there was a significant difference on the daily cost of an excavator operator. A contractor in the North East and South West of England would reportedly expect to pay £120 per day while in the South East and East of England, the rate would be £140 per day. That is a 16 percent difference, depending purely upon location. Similarly, quoted waste disposal costs varied from £75 per tonne in the North West and £80 per tonne in the Midlands to as much as £100 per tonne in the South East.
According to our vox-pop study, contractors in the North East would expect to pay around 65p/litre compared to 67p/litre in the Midlands rising to 70p/litre in the South East and as much as 75p/litre in the East of England. That represents a 15 percent difference in the price of fuel depending if you ply your trade in Newcastle or Norwich. But that is merely the tip of an expensive iceberg. A mid-range (25 tonne) excavator running at medium revs could burn somewhere between 13 and 18 litres of fuel per hour and clock up as many as 2,000 hours per year. But perhaps the most notable difference was the range of gas oil fuel prices across the UK. Although these are subject to fluctuations seemingly based on nothing more than market sentiment, the disparity is both significant and potentially costly.
That could mean that a contractor in the East of England could be paying between ÂŁ2,600 and ÂŁ3,600 more per machine per year than an equivalent contractor in the North East.
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