Comment – End of recession won’t end hard times…
The demolition industry will feel the effects of recession long after it’s officially over.
Mark Anthony
In the past few weeks, the dark veil of recession has shown signs of lifting. France, Germany and, more recently, China have seen their economies enjoy a sufficiently sustained period of growth, albeit negligible, that has lasted long enough for economists to declare them officially “out of recession”.
Closer to home, mortgage lending is on the rise again at long last and even house builders, among the worst hit by first blows of the credit crunch onslaught, are reporting a slight upturn. Together with some more positive news about consumer spending, these statistics have brought a slight flush to the cheeks of the lifeless corpse that is the world economy.
But we’re not out of the woods yet. In fact, I am concerned that even when we do crawl out of the recessionary chasm that swallowed us some 12 months ago, the struggle is far from over for the demolition industry.
The first hurdle the industry is likely to encounter is a hangover of thinner margins. Main contractors and developers have “enjoyed” a period of intense competition among demolition contractors which has led to some near-suicidal pricing practices. Having grown familiar with that level of cost, these developers and contractors are not suddenly going to accept a post-recession price hike. Indeed, I would personally be amazed if the “value engineering” built into virtually every contract these days does not continue long after we’ve shaken the recessionary monkey off our collective backs.
The second and, perhaps, bigger challenge is in planning. With the notable exception of certain Government-funded departments, new build and its associated planning has all but dried up in recent months. Even when the supposedly wise heads in Government sound the “alert over” sirens and the world returns to some semblance of normality, demolition contractors will find their workload wedged behind a logjam of planning applications held over from the dark days.
Both of these problems are beyond our control and, as usual, we will just have to make the best of a bad job. We’ll have to do the same with equipment fleet renewals, expansions and maintenance programmes that have been undermined by the current recession.
Governments around the world have climbed aboard the stimulus package bandwagon, injecting trillions of tax dollars into comatose economies; but that has failed to change the attitude of most banks and finance houses that would still rather see those dollars on their own bottom lines than on ours. As a result, even those demolition companies that have managed to maintain a good workload through the recession have found themselves blocked at every turn when they set out to buy new or replacement equipment.
And can we all, hand on heart, say that we’ve invested as much on machine maintenance during the recession as we might have during a boom period?
The one area where demolition contractors do control their own destiny however, and the area that may yet prove to be the hardest to fix, is in the field of training and recruitment.
Sadly, and despite the fact that many of us have experienced a recession or two in the past, the industry has largely followed its usual path of knee-jerk cost-cutting. First to go is the marketing budget, followed by the investment in training and then, when all else fails, companies have slashed labour levels. And, as in previous years, these job cuts may have started by slicing thin slivers of fat to help make contractors leaner, but they have continued to slice through the meat and to the very bone of some company’s corporate structures.
In my opinion, this is where our biggest problem will lie.
For one thing, training agencies have also responded to the recession by slashing grant-funding for training, a move that has been particularly keenly felt in the UK. In addition, with the majority of industry training reliant upon either on-the-job tuition or employer-funding, anyone that has found themselves unemployed during the recession will also have found themselves falling behind in their training, unable to keep up-to-date with the latest legislative changes and unable to renew existing qualifications because of the prohibitive cost.
This, I fear, is going to come back to bite us two-fold.
First, many of our most experienced and knowledgeable staff may have been forced to move on into other industry sectors, simply to keep a roof above their heads. As a result, there are now contracts managers and site supervisors stacking shelves at the local Wal-Mart of Tesco, or flipping burgers at McDonalds.
Never mind all this talk of secondary aggregates recycling and materials efficiency. This is a waste of HUMAN resources and one for which the economies of the world should be ashamed and held to account.
The second and equally savage bite will manifest itself in a long and drawn out inability to train newly-recruited staff quickly enough to track the upturn when it does finally arrive.
Many training bodies haven’t just turned off the spending tap; they’ve dismantled the pipe work and sold the water tank for scrap. That’s a problem that will not be fixed instantly and that could easily run for years as the industry stabilises. And even if a contractor refuses to allow a lack of grant funding to stop him training his new staff, will the industry still have the qualified trainers available to do the work? Or will they be salting fries alongside the site supervisor at McD’s?
Before you dismiss this as scaremongering or the cynicism of a bitter old hack, ask yourself this question:
If your workload returned to 2006/07 levels tomorrow, could you cope?
I look forward to hearing your feedback.
Mark Anthony
Posted: August 21st, 2009 under Audio, General.
Comments
Comment from Oliver James
Time August 21, 2009 at 6:33 pm
That doesn’t make for very cheerful reading Mark, but unfortunately I think there’s a lot of truth in it, particularly the reference to value engineering. I can’t remember the last contract I saw that wasn’t cut in some way post-tender.
Comment from Jon
Time August 21, 2009 at 8:31 pm
Excellent Article, very informative and definitely a thought for the weekend.
However I wonder how many other labour dependant industries this question also applies too, and how will it stifle our future growth.
The I.T. service industry is one I am already aware of.
Comment from michael saunders
Time August 22, 2009 at 1:19 pm
while agreeing with the things you have said in your article, there also a few underlying factors to all of this. I for noticed that when this recession started early last year i noticed an alarming trend in the use of labour to cut costs in many firms. I saw the use of workers with only CSCS cards and not CCDO working on sites, and although i said to my emplorer that if anything went wrong he would have problems with either the HSE or his insurance it was swept under the carpet (or because it was cheaper to use unskilled workers ?) but no matter what is said or done you have hit the nail on the head about training. Thanks to you and C&D my problem is about to be sorted but my main concern is that will this practice of using totally inapt workers being allowed on site. I may only be a topman but i have access to the HSE site i also try to keep up with all legisation regarding my chosen industry and willfight tooth and nail to keep my CCDO current. But if companies keep using cheaper labour who have only use CSCS the older workers like me will at some point think what the hell its time to go. And lets be honest about this, you can rewad or study as much as you like but how do you compare that to 40 years work and experience. I have stood on walls and hand dug them down in the early years and watche as this industry has gone from strength to strength in safety, but if Demolition loses the likes of us who have the experience who will train or show those coming in how it is and should be done. To any company owners or directers who read this, why not all put into a fund to help those who like myself have earned your companies the money over the years. You can only beat the donkey so much because one day it will just give up and turn away. So if we do come out of this recession at some point there may be a load who do not have the current cards and what happens then, no cards no work no industry and maybe no companies for lack of foresight
Comment from Tkc Corp
Time August 22, 2009 at 3:05 pm
We agree with “the end of recession won’t end hard times”. The recession effects and transfer of value may turn out to be the very drivers of economics that could begin to radically transform and change current demolition methodologies and business mindsets on a national contracting and project development scale.
The issues of value engineering, planning, maintenance, recycling, environmental, and personnel training are just some of the many upfront issues that we feel need addressed at all levels of the demolition industry. In these current conditions the competitive contracting bid process alone foster some of these issues.
It does appear that a majority of the smaller, honest, hard working contractors in our industry do not have the resources nor the contract/estimating and/or business development expertise to operate successfully. These owners/managers appear to be to busy running equipment and/or expediting equipment and supplies to get the big picture of the negative results that occur with non-performance and below cost bidding strategies. The odds were more than likely stacked against them from the planning phases of the project.
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We believe that this is one of the major factors that has led to non-performance of contracts, negative press, safety issues, liens and lawsuits, etc, which still appears to be rampant in this industry and is referenced again and again in some of the demolition posts.
There is nothing worst in a contractor’s life than trying to perform a hard money contract when you (as a contractor) know you bid well below cost!! This is a cause and affects issue that not only affects the industry, owner/employees, but family members and friends as well….It is a vicious circle and this operational strategy is not fishing on the right side of the boat.
When the top line looks shaky and the bottom line looks worse, the temptation is to go after discretionary spending. Fine – but we are not considering innovation, project development, marketing operations, and building the company optional. Sacrificing our business future for a slightly more comfortable present is not worth it.
Why not give the industry a venue to find real help, guidance, and to be of added value to their individual operations by offering educational training, business development strategies, contract administration help etc, etc and promote “professionalism” within the industry at the same time? Talk about a bang for the buck!
Comment from john woodward
Time August 24, 2009 at 9:21 am
Mark, I agree fully with your article and feel that many contractors have made a mistake in not continuing to train when things are tight but when funding has been withdrawn ther is little to help contractors to cover costs. NDTG and ourselves have cut training course costs to help companies but I notice that calls regarding training are mainly for a course “now” because a client has insisted on a particular training certificate, rather than a structured training approach over the year.
We at C&D are able to offer a free training consultation to advise clients as to what training they will need over the next 12 months to keep industry compliant and they can spread the cost of that training by a simple monthly payment. Maybe this is the way to go to ensure that when the recession eases we are ready to move.
Comment from admin
Time August 24, 2009 at 11:33 am
John, I think your attempt to ease contractors through the current (and ongoing) recession is commendable, but I do wonder just how many demolition companies have simply drawn a line through their training budgets as they batten down the hatches?
Comment from john woodward
Time August 24, 2009 at 12:59 pm
I am sure Mark that they have and will continue to put training as low on their list of priorities when things are tight. I have heard worrying news today that a major Midlands demolition contractor is pulling out of demolition completetly to concentrate on other areas of their business. Will they be the first of many?
Comment from admin
Time August 24, 2009 at 1:02 pm
That is terribly sad if that proves to be true. Yet another huge loss of knowledge, expertise and experience, and at a time when the industry can least afford it!
Comment from admin
Time August 24, 2009 at 1:57 pm
I just wanted to pick up on the comment made by TKC Corp above with regard to providing the industry with a venue for help and guidance.
This is something that I have been discussing for quite some time with John Woodward at C&D Consultancy, both in his role as a trainer AND in his role as vice president of Institute of Demolition Engineers.
I for one believe that the way forward to industry professionals is a common and universally-recognised professional qualification, something that the IDE has already developed and which they could (and do) offer beyond UK shores.
In addition, we have been discussing the possibility of hosting some online “webinars” on a variety of demolition-specific subjects. One of the key stumbling blocks for this has always been the potential language barrier although, thankfully, this SHOULD be less of an issue with US-based contractors. (And if you’re not keen on the online format, I am sure that John would willingly visit the US if the demand were sufficiently high).
As for a venue, Demolition News was established as a news aggregation site, one that pulled together industry news from wherever it could be gleaned. Over the ast year, and in response to reader/subscriber demand, that remit has changed and we will happily change it again (or add to it) if that’s what is required.
I have no intention of creating another demolitionforum as that model already exists. Although, I do firmly believe that there IS scope for an area that bans all forms of sales and promotion and is merely a hub for demolition professionals to meet, discuss their concerns and issues, and to push best practice regardless of geographic location, language, or size of the business.
I’d love to hear what others think.
Mark
Pingback from End of recession not necessarily end of tough times – Demolitionforum.com Forums
Time August 21, 2009 at 5:18 pm
[...] End of recession not necessarily end of tough times Demolition & Dismantling editor Mark Anthony postulates that while the first signs of economic recovery might now be emerging, a true recovery remains a long way off for the world’s demolition contractors. Read the full article here. [...]