One Person's View, But Most in the Industry Will Agree!

Whilst the battle to make the powers-that-be understand that over-regulation is damaging to the whole heating and renewables industry continues, I am pleased to share the letter below with you. It is the view of just one person, but I know that it is typical of the opinion of many thousands of installers all over the country.

Sirs

Recently we decided to take the plunge and apply for MCS registration but the hidden costs, work and stress involved to comply with all the MCS requirements is such that we have been forced to withdraw our application.

The government’s most recent U-turn on feed in tariff prices which pulls the rug out from under the renewables sector’s feet, does nothing to instill any confidence in the sector whatsoever and I have to wonder just how serious our government are in aiming to meet the Kyoto agreement figures in 2020 since at present we are the 2^nd worst in the world with only 5% achieved?

It isn’t just the obvious membership and assessment costs involved but also the hidden training, lost revenue and bureaucratic costs as well as the intrusive nature of the yearly assessments, ongoing surveillance at all stages of each job, the level of paperwork involved, the environmental issues with creating so much paperwork, storage of the same, time/money lost through assessments, added stress and to be honest, for a small business with either one proprietor or married partners, internal review meetings which are rather pointless paper exercises.

In such small businesses, these procedures are done as a matter of course but not necessarily minuted or recorded; there simply aren’t enough hours in the day! If we are to take on another member of staff just to take on the extra paperwork involved, it rather defeats the object of trying to make a profit. All in all, the costs for a small business of say 8 employees; to remain compliant with MCS is over £5000 per year! This just isn’t viable.

There is no guarantee that there will be sufficient renewables work (certainly we haven’t had enough enquiries) to cover the extra man hours and cost of MCS registration let alone make any profit afterwards and it seems to be yet another serious hindrance to work which could be so easily avoided.

Paul Reeve of the ECA correctly identifies this increasing nightmare of certification and bureaucracy as a massive barrier which local contractors have no incentive to surmount. “People are already trained in this work and it would be irresponsible to burden them with further qualifications under the Green Deal. The government needs to know there is a ‘plan B’ in which the local contractors, rather than the major energy companies or retailers, offer a much more direct route to the homeowner.”

Mr Reeve is absolutely correct, we are here, waiting to promote renewables, trained, insured and often have reputable, well established and above all stable businesses which local people trust. We need to be given the freedom to do this work to a high standard (which the MCS does not address) for our customers without unnecessary financial and bureaucratic burdens.

Economic times are hard enough and we keep seeing new firms start up, clean up and go bust yet it is the small local businesses which are the stable back bone of this country. MCS asks for insurance to cover customer’s warranties should a firm go bust, this we can do so easily but it doesn’t stop the gravy train chasers going bump when the grants stop.

When will our government realize that we need to mobilize the whole of the heating and electrical industries small businesses to help the UK meet its Kyoto agreement quota?

Ironically MCS is THE SINGLE BIGGEST barrier to growth in this area. Appropriate for larger firms of 50+ employees but crippling for SMEs. PLEASE revoke this silly money-go-round and let us get on with the work of building our country.

J Farrer

Director

David A. Farrer Ltd

Microgeneration Strategy Recognises the Importance of Small Business

DECC published the Microgeneration Strategy today.

http://www.decc.gov.uk/assets/decc/11/meeting-energy-demand/microgeneration/2015-microgeneration-strategy.pdf

In that document, the importance of small business is recognised in Action 25 and the explanation in clause 4.14.

Action 25

Industry bodies to reach out to the small installer community who are potential advocates of microgeneration technologies as part of their everyday business.

4.14 At present, small installer companies may be not be clarifying the case for microgeneration to potential consumers. The trade associations and other industry bodies have an ideal opportunity to work with their respective members to promote microgeneration. SMEs will want clear concise information about what the opportunities of microgeneration mean for them and how they can get involved.

Well, they have got this spot on, but smaller installers are not even talking microgeneration to potential consumers and they won’t until they feel able to get involved.

I absolutely agree with the sentiments of Action 25, but as it stands, the smaller installer community are not ready to be advocates, but quite the opposite.

See my blog Over-regulation is the Biggest Barrier to Renewable take-up

I believe my proposal to exempt small business from the QMS element, if implemented, will help this part of the strategy succeed.

Over-regulation is the Biggest Barrier to Renewable take-up

We all know the environmental arguments in favour of installing renewable technologies, and I won’t repeat them here.

What is less widely understood is the business dynamics that will underpin the enormous change of scale required for renewable technologies to make a measurable impact on the energy used in our homes.

The Renewable Heat Incentive, (RHI) and other grants designed to stimulate take up of renewable technologies (RTs) all have the same caveat – to qualify, the installation must be undertaken by an MCS accredited installer.

At first sight, that sounds a reasonable requirement. After all, we don’t want a load of cowboys running round bringing the industry into disrepute, do we?

A little more digging, however, puts the matter in a new light. MCS accreditation has three elements. Firstly, there are checks on technical competence. So far, so good. Then there is the enforced membership of a group insurance scheme. Finally, and this is the problem bit, there is the imposition of a mandatory business process quality management scheme (QMS), similar in nature to ISO 9000.

The total cost of MCS accreditation varies, but estimates range from £2,500 to upwards of £5000 once all charges and working hours lost are factored in.

Why is that a problem? The natural constituency from which a large base of RT installers should be recruited is the existing group of plumbing, heating and building contractors. The vast majority of these firms are small businesses – from “one man bands” to small employers with two or three staff. Usually the business owner (or often his wife) does the paperwork in the evenings or at weekends.

These businesses are put off becoming accredited, both by the total costs and by the weight of paperwork required. The burden is simply too much to bear for a small company which is likely undertake only a handful of installations per year. To make matters worse, there is a danger that they won’t simply sit silently on the sidelines – they are likely to actively discourage their householder customers from including RTs in their refurbishments and extensions, because they know that they will not be able to carry out a project which requires MCS accreditation.

So how can we correct this? The simple answer is to exempt smaller businesses (with less than 5 employees) from the QMS element, so that they can focus on technical competence and safety. That’s the minimum guarantee that regulation ought to offer to the public. This will reduce both the cost and the administrative overhead for smaller installers, thereby encouraging them to register. Once that is dealt with, it is a matter for consumers to choose between the larger company, which may provide peace of mind (at a price!) or a smaller, local tradesman.

Government already recognises that regulatory requirements should be less burdensome for small businesses. A number of exemptions are already in force in respect of employment and health and safety regulations, so it should be a simple matter to extend the same exemptions to the QMS elements of MCS registration.

We currently have about 120,000 registered gas engineers. We only have 2,274* MCS accredited installers (covering all renewal technologies).

With these numbers, we simply cannot achieve the scale of RT installations that we need, and instead of creating an incentive for installers to train up and register, we have created the perverse situation which encourages them to discourage householders from considering the investment in green technologies.

This government talks a lot about the green agenda, encouraging small business, and deregulation. Slimming down MCS to a competence/safety based system for small business will tick all those boxes, with zero downside risk.

*statistic taken from www.microgenerationcertification.org, 5^th May 2011

UPDATE - 14th July 2011

Following consultation with a wide range of stakeholders, some concerns have been expressed that exempting smaller companies from the QMS elements of MCS could weaken consumer protection, and risk bringing the industry into disrepute. Whilst these concerns are understandable, we think that they are misplaced.

It is important to remember that consumer protection is properly covered by membership of the REAL Assurance Scheme, not by QMS. The REAL requirements are much more clearly written than QMS, and can be easily understood by consumer and installer alike. They cover mis-selling, the provision of technical information, allow for protection of vulnerable consumers and describe general good practice. Critically, they also provide a mechanism for conciliation, rectification and dispute resolution.

QMS tells people how to run their business. BPEC, C&G and other related qualifications teach people how to install systems correctly. REAL sets standards for how customers should be treated. The latter two are far more important than the former, and no-one is arguing that they should be scrapped.

We have not been able to find any critical area in the QMS element which would not be adequately covered for businesses of less than 5 employees either in the REAL Consumer Code, or in the general requirements, or in the technology-specific MIS series of documents. Should other stakeholders identify such a critical omission then it may be necessary to make a minor addition to one of the latter documents.

Do They Actually Know How Much it Costs?

GUEST BLOGGER - Ray Stafford

I know that industry bodies like the CBI routinely gripe about the burden of regulation on business. It’s such a common complaint, that I suspect that most people just tune it out, as part of the background noise to be expected from that interest group.

Looking through today’s work, I was taken aback by three different tasks, all of which have regulatory implications and all of which consumed expensive and scarce resources.

First up – a meeting with our HR manager to discuss an employee who is approaching their 65^th birthday. We have never enforced the default retirement age, and have always allowed employees the same rights that they are now getting by legislation. However, we have had to overhaul our procedures to ensure that most elusive of targets - ”compliance”. Lets just make this clear – this has not benefitted the employee one jot. All it has done was cost an hour of time for two senior members of the management team.

Secondly – we have a successful branch which we want to expand. Fortunately, the building next door is vacant, so in two or three calls to the agent, we reached a deal on taking over the unit. This is clearly good news for everyone, particularly the local economy. This happened about a month ago. We want to join the two units together, by knocking a doorway through the wall between them. No problem with the landlord, but the local Building control need drawings in quadruplicate (seriously!), structural calculations, plus a fee for the privilege. It will take two blokes less than a day to make this doorway. So far the red tape has cost over £1000 and delayed the project by 4 weeks. Incidentally, although one of those sets of drawings will be sent to the fire brigade for comment, once the work is done we will still have to update our own fire risk assessment, because they don’t do those any more.

Just after I came off the phone from chasing that up, our Finance Director came into the office. She was querying some purchases of vehicles, computers and other assets acquired in the last quarter. The department of national statistics wants to know what we spent on these things in the period January – March 2011, AND IT WANTS TO KNOW BY 8^th APRIL! Since we won’t necessarily have the invoices for March purchases yet, we need to “estimate” it. So the figure will inevitably be wrong, but we are required by law to supply it.

All these things genuinely came up on one perfectly ordinary Tuesday morning, in a middle sized business. In between time, I managed to spend some time on running the actual business. It made a pleasant change.

I am sure that any individual piece of regulation can be defended in detail. The problem is that more are added each year than are taken away. It’s the cumulative burden that is so stifling – the ratchet that imposes “just a little” new burden every few months.

So here is my solution:

• No new regulation should be imposed on businesses without primary legislation. Too much of this nonsense is imposed by un-accountable civil servants.

• All regulations should have a sunset clause which causes them to lapse after 5 years. The House of Commons would have to actively vote to renew any specific regulations that it wanted to remain.

“Ah” I hear you say. “But that would be administratively burdensome, would waste the time of our legislators and stop them from doing their proper job!”

Maybe so. At least then they would know what it feels like!