The unsustainable truth about the UK construction market
The 2017 CN100, published by Construction News, makes some interesting but troublesome reading.
Whilst turnover is up within the UK's 100 biggest contractors, profitability has barely risen overall, and within the top 10 UK contractors, the average profit margin is -0.5%. That's negative profit; contractors are essentially paying for the pleasure of constructing the UK's infrastructure, buildings and public realm.
This picture isn't new.
I wrote an editorial for the 2016 CN100 and argued that the UK's biggest contractors were spread to thinly, being generalists rather than specialists in the sectors they operate in, and in my mind that issue still rings true.
But, I also believe the UK client base has a big role to play in the economical sustainability and stability of the industry.
Over the past year I've been fortunate to support a number of contractors featuring in this list on tenders for major public sector projects and unfortunately price is still the deciding point on many of the UK's biggest contracts. Whilst clients may say they're applying a 70/30 quality/price split, when all bidders are marked almost the same on quality, price ultimately becomes the deciding factor and the industry knows this.
Client organisations have to recognise that buying cheaply not only puts them at risk of getting an inflated out turn cost and poorer quality buildings, but it also contributes to a negative cycle of low margins and pricing to win.
Ultimately, this is starving the industry of the ability to innovate, modernise and transform, so that we can attract and retain the best talent, invest in rapidly changing technology, and adapt better to market changes.