The trials of UK construction firms
Putting a number on the construction industry’s ongoing struggles, the Office for National Statistics (ONC) reported that output was down by almost 3% in March 2018 – the biggest dip in six years. Barely-there profit margins are conspiring with Brexit uncertainty and a painful shortage of skilled workers.
Are construction companies making enough profit?
Healthy competition isn’t a given just because there are plenty of participants. While record levels of construction industry entrants contribute to robust hiring numbers, two-and-a-half thousand British construction firms went broke in 2016, more than any other industry besides administrative services. Too many bidders for the same project plus a failure to differentiate on quality and you’re set for a Carillion-style race to the bottom.
In short, profits are squeezed and have been for a long time. Year after year of negligible margins and a shaky outlook is exhausting for industry insiders and certainly no boon to morale.
Balfour Beatty, however, hasn’t taken things lying down. After years of profit warnings, the company’s strict programme designed to prevent underbidding on risky contracts and to support sustainable profits has bucked the trend: its share price is hovering around double the levels it hit during the doldrums of late 2014.
The B word
This will not be news to our readers, but here too our national almost-quasi-hard-or-maybe-soft step away from the EU is not helping. Brexit uncertainty is behind delays for large construction projects, with investors reluctant to sign contracts until clarity emerges around the import and export of materials.
The Times observes economists’ forecast for a 0.2% decline in construction output in August: ‘That would leave it needing an unprecedented rebound in September to avoid shrinking for a second consecutive quarter – the definition of recession.’
Mind the skills gap
And even so, plucky construction entrepreneurs in this country are giving it a go, thereby creating new employment opportunities. Frustratingly, there are reports that these vacancies are not being filled. Last year’s conference ‘Skills Shortage in Construction: building the future post-Brexit’ saw academics and industry experts scrutinise Brexit, a lack of proper training and the mishandling of large project awards for their role in exacerbating the skills gap. Research into the US construction recession mirrored these concerns, indicating that skills shortages are getting worse. ‘By 2020, millennials are expected to represent half of the global workforce,’ explained a writer for SAP’s Digitalist by way of warning, ‘many with little to no experience or interest in the construction industry.’
