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Tight squeeze

There's a reason why companies within our industry aren't investing heavily in the latest technology and running their own apprenticeship schemes at the moment and it all comes down to margins...

Margins are being tightly squeezed to the point that even some of the big contractor's margins are negligible as skilled labour continues to be in high demand, holding back growth and pushing up costs.

There's not the same labour pool that there was ten years ago, before the recession when many young skilled workers were made redundant and forced out of the industry. Those workers have never been adequately replaced and now that the work is more abundant there is a gulf between what needs doing and who is available to do it. Naturally this creates a demand that cannot be met, pushing up the salaries of the skilled workers and putting the industry and the margins under a great strain.

Those costs are then pushed down the food chain. It's no secret that a lot of the main contractors are struggling to maintain their own margins and we are all constantly looking for where best to make the cut.

Many sub contractors, in turn, are fighting to outbid each other to get contracts that will then leave them with the tightest of margins. They too are left with no money to train new recruits and so the skill shortage issue continues, turning in a vicious circle.

One crucial element to be considered when protecting any precious margin is time. Fact is, if you want to maximize your profit margin, you have to deliver a project on or ahead of time. The value of any project is established based on the time that the work is expected to take. You go over that and you are, essentially, working for free.

Other factors can play their part like building products costs and interest rates on financing however both of these, to some extent, are beyond the contractor's control - although if all the materials are properly costed and purchased up front then this shouldn't be a problem.

We all have to strictly police our margins in order to survive. We want to be able to invest in the business. Training and technology are both essential in the long-term if we are going to grow but, in order to do this, we must protect our margins now and keep a watchful eye.


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