Are squeezed budgets draining the life out of UK construction?

In August 2017, the largest 50 contractors in the UK reported a combined revenue of £57.2 billion, according to TCI 100, with 11 (22 per cent) incurring losses and 20 (40 per cent) making pre-tax profits of three per cent or less.

In total, that is 62 per cent of the cream of UK construction PLC making less than three per cent or incurring losses.

Richard Beresford, chief executive of the National Federation of Builders (NFB), said:

“It’s no surprise that large organisations accept contracts with low profit margins. When it comes down to a bidding war, with clients determined to drive down costs, only the biggest competitors remain at the table because regional contractors and SMEs will have already walked away.

“You would only consider working for miniscule margins if they were countered by the prospect of repeat business at a far greater value. Given the ongoing construction skills crisis, you have to be a very large corporation to take this approach and imagine that it will be worth your while.”

Neil Walters, incoming national chair of the NDB, added:

“When budgets are squeezed to this extent at the top of the chain, you can imagine the impact along the supply chain where further negotiations to protect that three per cent are commonplace. As an industry, we cannot sustain growth and innovation and take on the massive training agenda required when we continue to perform in this fashion. The industry and its clients need to accept that contractors need to be able to make a reasonable and sustained profit of at least five per cent.”