That is the stark warning delivered by the Bodyshop Opinion Survey 2004, published this month by Sewells Information and Research. Researchers questioned 486 bodyshops for their views of the industry, work providers, suppliers, estimating systems and car manufacturers. Their responses paint a bleak picture.
The number of UK bodyshops has declined by just over 15% since 2001, most notably marked by large decreases in the number of small to medium-size business.
“There are some 4,799 primary bodyshops (where body repairs are the main business); in 1996/7 there were 6,300. At this rate, the number of primary bodyshops will fall to 4,000 within five years,” states the Sewells report.
Bucking this trend, however, are larger bodyshops employing more than 12 staff. Numbers have grown 9.6% since 2001. Sewells puts this down to the closure of smaller bodyshops pushing up the average size, and medium-sized businesses employing more staff.
Fewer bodyshops means fewer staff: some 6,500 panel beaters and sprayers have left the sector since Sewells’ first bodyshop survey in 1996. “Ultimately the loss of skilled workers will become a major problem,” warns the report.
Since 2001, the body repair market value has grown from £5.2bn to £5.45bn. Insurers and accident management companies account for 82%, down 2% as bodyshops look to increase retail business. The average value per job has increased in real terms by 3% to £1,044.
Work provider relationships poor
Relationships between body shops and their work providers are at their lowest point since the survey began in 1996. The national average insurance labour rate is £23.80 per hour, a rate described as “pitiful” compared with the £54.97 rate commanded by mechanical repair and service workshops. The hourly rate paid by accident management companies, fleets and credit hire companies is even lower, at £23.65.
Coupled with increasing wage demands due to the shortage of skilled workers, and high costs from courtesy cars and retraining, the result is bottom line profits of just £10-£20 per job.
Regional variances continue to be a hot topic with insurers reluctant to recognise vastly higher overheads in some areas of the UK. Within the M25, labour rates are around 5% above the national average, despite productives’ wages being 23% higher.
The good news is that a current slowdown in wage increases is allowing average labour gross profit margins to increase, although this is tempered by a warning that the likely issues over pay may speed the departure of skilled workers from the industry. The danger of reliance on major contracts is also highlighted.
Pleased with paint providers
Respondents rate their relationships with paint companies and factors higher than virtually every other business relationship in the motor industry. Market shares in refinish have changed little, however, with Nexa Autocolor (formerly ICI) still dominating.
Ron Nicholson, director general of the VBRA, urges work providers to improve their relationships with repairers. “I’d like to think that insurance companies are beginning to understand the difficulties faced by bodyshops, but I wouldn’t say all of them are,” he says.