Memorandum submitted by the Civil Engineering Contractors Association

 

 

Executive summary

An October survey of small and medium sized members of CECA found that 46% had seen the cost of their banking arrangements rise as a result of the current economic downturn.

28% of firms had found it more difficult to secure new bank funding since the start of the economic crisis according to the same survey.

According to recent anecdotal reports, firms have not seen any worsening of the situation since the survey, however concerns still remain about treatment of some firms by their banks.

Availability of Small Business Finance Scheme should be accelerated, and Business Payment Support Service should be made available to firms who were overdue on payments to HMRC prior to the announcement of the service's introduction

 

1. I write today on behalf of the Civil Engineering Contractors Association (CECA) in order to provide evidence to the Business and Enterprise Committee on financial support for small and medium-sized businesses

2. The Civil Engineering Contractors Association has for some time been aware that the problems experienced by the UK banking sector were having an impact upon its members.

3. Initially this impact was limited to a decline in workloads associated with sectors closely linked to the availability of finance such as house building and commercial property. Workloads in these areas have collapsed since Q2 2008, putting many small and medium sized businesses under pressure to find new sources of work.

4. However in September 2008 CECA started to receive reports from members that the banking crisis was starting to have more direct impact upon their businesses, with claims that banks were raising costs of banking facilities, or withdrawing them altogether.

5. In order to build up a clear picture of the impact of the downturn upon these SME firms, in late October CECA carried out a survey of its small and medium sized members, asking for details of their experiences on a range of issues including the cost of banking, as well as broader issues such as workloads, payment terms, employment and inflation.

6. The results of this survey showed that 46% of firms surveyed had seen an increase in the costs of their existing banking arrangements since the start of the economic downturn.

7. In the same survey 28% of firms had found it more difficult to secure new funding from banks since the start of the downturn.

8. The results of the survey were published on 21 November 2008. Since then CECA has maintained contact with a number of its small and medium sized members, contacting a number of them following the announcement of the Business and Enterprise hearing to find out their latest experiences.

9. The general picture among those firms spoken to was that they had not seen a worsening picture in terms of their relationships with their banks, although concerns were raised about what would happen when firms came to renew existing facilities.

10. In a small number of cases where facilities had come up for renewal, firms reported increased fees from banks. In one case a member reported a near trebling in the cost to renew his overdraft facility, with the introduction of a charge for the facility even if it remained unused.

11. CECA welcomes Government proposals to support small and medium sized enterprises through the current difficult economic conditions, including the introduction of the Small Business Finance Scheme. But with firms that would be likely to benefit from such a scheme often already under pressure, CECA would press for the scheme to be made available as soon as is possible.

12. Finally CECA also welcomes the proposed Business Payment Support Service provided by HM Revenue & Customs for firms worried about being able to meet tax, National Insurance, VAT or other payments. The potential to spread payments over longer periods will provide vital respite to many firms. However we are concerned that the support is only available to firms that became unable to meet payments to HMRC following the announcement of the service. Firms that were already overdue on payment appear not to be eligible, leaving these companies open to strict enforcement action that may put otherwise healthy firms out of business.

 

The Civil Engineering Contractors Association represents in excess of 350 UK civil engineering contracting companies.

Between them these member companies are estimated to be responsible for between 75 and 805 of all civil engineering workload carried out in Great Britain, constructing and maintaining the country's vital transport and utilities networks .

The civil engineering sector employs more than 110,000 people with an annual output of around 12 billion.



December 2008