When it comes to the crunch

Property prices tumbling? Blame the credit crunch. Host of zeros added to your weekly shop? That’ll be the credit crunch. Can’t find that rogue sock first thing in the morning? Got to be the credit crunch.

It may seem to be influencing virtually everything at the moment, but how is the worst economic downturn in years affecting the electrical and mechanical contracting sector?

Mike McNally, building services director at Hays Building Services, which each year publishes its Salary and Benefits Guide, in association with EMC’s sister magazine BSj, insists there is no great panic for the time being, although there may be some concerns bubbling beneath the surface.

“Many clients I've spoken with recently still have busy order books into next year, and although some smaller organisations have two to three months of work, and are looking to pick more up after then, there's no real alarm just yet, maybe more caution and prudence.”

Somewhat surprisingly, recruitment levels have not suffered either. Skills shortages have made for bigger salaries, with contractors now willing to pay above average rates for the right person.

The largest rise can be attributed to senior electrical contracts managers, who have enjoyed rises of almost 9% and can now command wages of up to £60 000 in central London.

“That senior level is where employers are prepared to pay the money to buy in skills and expertise,” says McNally. “There’s also the fact that it’s the largest area that we get a demand for but also where we have the shortest supply.”

However, NcNally was still surprised that the increases in salary against last year’s survey were so high.

“The client feedback I had 12 months ago was that salaries were reaching an all-time high and that they couldn’t see themselves being able to pay much more the year after. But things haven’t started to flatten out, and I think an increase in the counter-offer scenario has certainly had an impact.

“People don’t want to lose employees because they don’t want to recruit somebody else – they’d rather pay them another two or three grand to keep them. But the other firms who want them are so keen to get them on board that they think, ‘What’s another £2-3 k on top of what they were going to offer?’ Before you know it, you’ve got that spiral increase.”

The problem with employers having to pay so much for seniors is that they are fighting over a finite number of skilled workers. The long-term solution, of course, is to attract more people into the industry. Clearly, apprentices need to be taken on and juniors trained up, despite the economic climate.

The Hays survey shows that salaries for junior electrical contract engineers have risen by 4.5% in the past year, which certainly knocks spots off last year’s meagre increase of 0.2%. A junior in central London typically earns around £30 000 – certainly above average.

Perhaps such reassuring increases will help to attract a greater number of young people into the m&e sector. For the time being, however, the age-old problem still prevails: the lack of people entering the industry at the lower levels, and not enough school and college leavers considering it as a career option.

“There are not enough schemes on offer to train up people to come in at the bottom end. That’s been an issue for the last 10 years,” says McNally.

“There are some interesting initiatives that people have tried to introduce, but we don’t have a sufficiently joined-up approach from all parts of the industry to make an impact.”

Within the next year, McNally grants that the industry could see a continued premium being paid for people with real transferable expertise, but thinks generally salaries will level out.

“If you look at what most government advice is on inflationary pay rises, it’s urging people to be more cautious, and I imagine that would be no different with employers within the construction industry.

“I would expect minimal, if not zero, levels of inflation in salary growth over the next 12 months. They’ll rein things in a bit, because concern with the economic downturn will probably make them a little more careful, whereas in the last few years it’s always been growth, growth, growth.”

So, what advice does McNally have for contractors who are trying to combat the crunch within the coming months? While he is not recommending that firms throw their caution to the wind, he does offer up a word or two of advice when it comes to taking on new recruits.

“It’s quite easy to slip into a mindset of thinking, ‘There are going to be more people looking for work in the market at the minute,’ or ‘Some people might have been laid off so we can afford to wait around until somebody good comes along.

“The opposite is true. People who are genuinely good are staying where they are. They don’t want to be last in and first out and are thinking, ‘Is this really the right time to move jobs?’

“Don’t let the economic climate cloud your judgement. There’s a limited level of people with the right skills out there, so if somebody good comes along, make sure you get them. And if you’ve got someone working for you who you don’t want to lose, make sure you look after them properly.”