Domestic bliss for the aluminium sector
CAB Chief Executive, Justin Ratcliffe, takes a look at the most recent CAB State of the Market Survey and highlights how CAB is trying to promote the industry to the next generation
The very latest CAB State of the Market Survey for Q4, 2013 continues to paint a positive and encouraging picture for the sector moving forward. While 26% of respondents said that they had operated at over 90% capacity between Q4, 2012 and Q4, 2013 a very encouraging 48% of respondents forecasted that they would be operating at over 90% for the next 12 months. Given this level of optimism it is perhaps unsurprising that 96% net balance of respondents predicted rising sales for the next 12 months. The survey uses a balance of respondents to identify trends with a positive balance meaning that the percentage of firms reporting a rise is more than the proportion of firms that reported a decline.
For the second quarter running, issues such as labour availability (21% of respondents) and capacity (25% of respondents) were given as key constraints on activity over the next 12 months. Further research showed that it was as much about having trained labour in the right roles which was possibly one of the real constraints. To avoid any complacency it is important to point out that 38% of respondents still saw demand as the biggest constraint. Despite the Chancellor recently stating that weak lending to small and medium sized businesses remained “one of the biggest challenges of the recovery,” only 4% of respondents believed that finance availability was a constraint on demand.
With recruitment now uppermost in the minds of many companies, it was interesting to note that over the next 12 months 50% net balance of respondents forecast labour growth (compared to 38% net balance in Q3, 2013). After 5 difficult years there was still a reluctance in some companies to take on any more overheads and the lack of availability of trained individuals, alluded to above, probably only made businesses more cautious. Perhaps unsurprisingly wages and salaries were reported by 82% net balance of respondents as being the largest cost factor together with 82% net balance for energy costs. This was followed by fuel costs (52% net balance) and raw materials (36% net balance).
With aluminium gaining significant ground in the domestic sector and having created new niches, such as the bi-fold door market, it was particularly interesting to learn of the Government’s recently stated target of 200,000 new homes to be built by 2020. Housebuilders are under pressure to increase supply and growing consumer confidence, higher levels of mortgage lending and the Government’s shared equity scheme, Help to Buy have all contributed to a rise in transactions in the housing market. Only last week TaylorWimpey reported that it had sold 11,696 homes up from 10,886 the previous year.
However, late payment continued to hinder the construction sector especially lower in the supply chain. An NSCC Q4, 2013 Survey reported that 55% of specialist contractors had carried out work on public sector projects during the final quarter of 2013. Only 61% of these contracts were reported as being paid within 30 days even though payment within 30 days is now a contractual requirement on all central Government contracts. On average, respondents secured a retention of zero on 61% of their contracts that were for projects in the public sector. The same survey showed that late payment and bid-peddling were ranked as the most important factors affecting specialist contractors’ businesses. Approximately 76% receiving payment between 30 and 60 days during the fourth quarter, marginally higher than the 72% of specialist contractors reporting only receiving payment for work carried out between 30 and 60 days during the third quarter of 2013.
It is always dangerous to draw too much from one period but a constant theme in recent quarters in the CAB surveys has been lack of labour availability. The Government are also realising that far more needs to be done regarding apprenticeships. However, I think we have a far more fundamental problem in that we are just not making enough effort to make construction and our own sector an attractive proposition for young people to consider as a career. To this end, CAB is actively supporting ‘Your Green Future’ (organised by Severn Wye Energy Agency) a series of interactive events which bring about engagement between a wide range of professionals and young people to inspire 14-19 year olds with the range of jobs, skills and qualifications available in the green economy. It also introduces students not only to key low-carbon sustainable issues but also to job opportunities. CAB has spent time so far discussing our sector and its opportunities to over 400 school children in Stroud and will be at an even larger event at University of West of England in April for over 1000 students.
