EXCLUSIVE report by Scottish-UK-Energy News
The managing director of an N. Sea offshore services company has revealed the real impact of companies imposing cost reductions and longer payment terms on the supply chain – which has hit SMEs particularly hard.
Dave Rowan, Managing Director, EPIC Intern
ational told an industry conference that his bank had called him – with the backdrop of the oil crisis – to tell him it was raising the security on his house against his business by 35%. He said:
“We have had payment terms increased by some companies from 30 days to 60 days and rates reduced by up to 40% in some cases.
“Three weeks ago, I had a call from the bank saying that, because of the oil price and state of the general industry, they wanted to increase the security on my house by 35%.
“When the bank looks at the longer payment terms imposed by companies and falling margins, it gets shaky. People on the outside looking in just see doom, gloom and instability and get concerned.”
“In reality we have no control over these issues imposed from higher up the supply chain. I’ve heard companies say that the supply chain needs to take more risks. SMEs are taking risks every day.
Rowan employs 100 people on contracts all over the world from the business he started 16 years ago. EPIC was in the “unique position” of being exposed to a cross section of the industry, working for both operators and major service companies around the world and main contractors on a sub-contractor basis.
The supply chain has been critical to the development of all of the operators in Great Yarmouth and in Aberdeen, he said, adding:
“As an industry, overheads have been too high for a long time from our point of view. However many SMEs run lean operations and can only pass cuts on to their workforce.”
“We have always been as cost effective as we can be with our operation being competitive and making 20 per cent reduction here and 30 per cent reduction there when companies demand. SMEs are already working on narrow margins which does have an impact.”
“So where do SMEs go at this time? We have nothing to cut other than salaries and jobs. We can’t ask for a reduction in rent or in council tax because the oil price is low.
“I will only go out of the area for specialist services I can’t get in the area. SMEs need to support other SMEs .”