The state of the subcontracting industry: How can Bibby Financial Services help?
According to Bibby Financial Services’ expert data, published in their subcontractor growth report, the subcontracting industry in 2019 has suffered from the average contract pipeline shrinking by nearly a third.
What is the current state of the subcontracting industry?
At this moment in time, in the subcontracting industry, the amount of work which subcontractors normally receive through contracts per year has drastically decreased, with the average amount of work per year measuring at just 19 weeks in 2019 after having decreased from 27 weeks in 2018, displaying a radical eight week decline.
In fact, many companies have stated that the available contracts are shrinking, meaning that firms can no longer risk refusing certain contracts and thus potentially lose business which, in turn, gives subcontractor businesses less freedom to select the projects which best fit their company objectives.
The Managing Director of Construction Finance at Bibby Finance Services, Helen Wheeler stated: “There are many ongoing problems currently facing the subcontracting industry. A growing number of businesses are finding themselves with little room to manoeuvre when it comes to choosing contracts, with small businesses being the worst affected.”
Since the collapse of Carillion in January, the subcontracting industry has been experiencing volatility which has only been worsened by the continued uncertainties surrounding Brexit, only serving to increase the lack of confidence in the industry and while making subcontracts, themselves, more short-term.
What this has, essentially, caused within the industry as whole, is the hindrance of cash flow, business savings, and hiring, with almost one fifth of subcontractors choosing to deprioritise hiring and building up cash reserves.
How can Bibby Financial Services assist with contracts and finance?
Furthermore, expert data from Bibby Financial Services revealed that, in 2019, 48% of subcontractor companies found the actual contracts themselves ‘difficult to understand’, having risen from 44% in 2018 and dramatically increasing from the 38% proportion of companies which found this to be the case in 2016.
MD Wheeler commented: “Many subcontractors are now relying upon the support of construction finance firms such as Bibby Financial Services who are committed to helping subcontractors feel more secure and supported so that they may build solid foundations for their futures.
“Bibby Financial Services have been working with the industry for over ten years and have become one of the leading providers of financial solutions.”
Specifically, the company can provide subcontractors with the vital knowledge and support that is required on the financial side of the industry, including services such as invoice financing for SMEs, clarifying the complex jargon and clauses within contracts for clients, and can also pursue the necessary payments that subcontractors need to keep payments turning over.
MD Wheeler added: “BFS aims to provide the necessary support to subcontracting businesses through every step of the process.”
How can the state of the industry be improved?
Potential solutions, proposed by some subcontractors, include the necessity for stricter regulations, a more active input from the government to aid in the stabilisation of the subcontractor market, and priority being given to the delivery of larger contracts to the subcontractor industry.
Bibby Financial Services also revealed that 89% of subcontractors, nearly a unanimous verdict, agreed that the government should intervene in the state of the subcontractor market. However, there is a considerable degree of disagreement over the most effective method to stabilise the industry in the wake of all its current issues.
Perhaps the most popular suggested solution, quoted by subcontractors, was compulsory adherence to the Prompt Payment Code, which 74% of subcontractors recommended, whereas the second most popular solution was a greater distribution of large contracts to subcontractors, quoted by 62%, while the third most popular solution was the avoidance of EU tariffs, recommended by 55%.
If you want to learn more about the challenges facing the subcontracting industry in 2019, and beyond, read Bibby Financial Services’ subcontractor growth report here.
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