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CN Barometer: Contractors will vote to remain in EU but fear delays around referendum

More than two-thirds of contractors will vote to remain in the EU at June’s referendum, research by Construction News has found.

In the latest CN Barometer 68 per cent said they would vote to stay, with a quarter of respondents saying they would leave and a further 7 per cent unsure.

Only 5 per cent of those who answered the question said the business they worked for supported an EU exit, with 64 per cent saying their company preferred to stay in Europe.

The barometer, which collated replies from 42 senior construction professionals, did reveal concern among contractors that the referendum could delay some projects, with developers acting cautiously until the result of the poll is known.

When asked whether they had seen developers put projects on hold until after June, 46 per cent of respondents said they had. One respondent commented: “Some decisions are being delayed without being formally postponed.”

Away from questions over Europe, more than-two thirds of respondents (68 per cent) said that developers are considering either delaying or cancelling jobs because of cost increases.

“Cost plans are the main issue,” one respondent said. “[They are] benchmarked on recessionary rates and prices, albeit this is normalising of late.”

Another said uncertainty over Europe combined with “high construction cost and potential oversupply in London in 2018” was leading to falling demand for residential projects.

Other respondents said clients had warned that work could slow down because clients were “pushing too much risk onto the contractor”.

“The risk:reward [ratio] is too low for main contractors,” commented one. “Gross margins should be in the circa 8-10 per cent range. Contractors have become selective as to what work they will price and which clients they wish to price work for.”

Party politics

Candidates were evenly split when asked which of the two frontrunners to become London’s next mayor would ’best support the construction industry’.

In response, 16 people voted for Conservative candidate Zac Goldsmith and 16 for Labour’s Sadiq Khan, while ten respondents said they didn’t know.

But when asked which political party best understands the needs of the construction industry, the overhelming majority picked the Conservative Party.

A total of 70 per cent of respondents voted for the party of government, with just 17 per cent plumping for Labour.

Respondents were broadly optimistic when asked about improving margins, with 54 per cent expecting them to pick up in the second half of 2016, while only 8 per cent expect to wait until 2018 to see an improvement.

The skills shortage (selected by 65 per cent of respondents), client demands (40 per cent) and ‘suicide bidding’ (40 per cent) were cited as the top three challenges facing construction businesses.

However, with skills being a crucial issue, the industry remains unimpressed with the performance of the CITB.

Fifty-five per cent of respondents said they were not satisfied that the body meets the industry’s needs when it comes to training apprentices, while a quarter said the government’s proposed apprenticeship levy should replace the CITB levy.

“The CITB is out of date and too expensive,” one respondent replied, while another said that “a more diverse approach may be required to meet future needs”.

Asked for their views on the next 12 months in the construction industry, responses included:

  • Pricing is more stable but we need to see more affordable land become available and local authorities continuing to drive their own schemes forward.
  • Public sector clients are slow to bring framework schemes to market (defence, custodial, P21+).
  • Capacity remains a key issue and the more enlightened clients are utilising a more collaborative approach through frameworks and two-stage procurement to secure better outcomes.
  • Failing main contractors should merge to reduce the overcapacity.
  • We see demand falling in residential projects with sales values between £1,000 and £2,000 per sq ft. Commercial property is becoming more uncertain due to the EU referendum, high construction cost and potential for oversupply in London in 2018.
  • The two-stage tendering process is proving very time-consuming and clients budgets have been poorly advised by PQS practices, causing concern on whether projects will go forward.
  • Clients’ cost plans need to be reflective of the current market, as an increasing number are leading to the “angst” of projects not being realised.
  • We are in uncharted territory – if anyone tells you they know where the industry / economy is going, they are lying. Makes it hard to plan and therefore hard to invest.
  • Next 12 months will be stable, as clients are committed to execute projects and we have secured a decent workload – but 2018 looks difficult.

CN Barometer

The CN Barometer is an anonymous quarterly survey sent to chairmen, CEOs and senior management at the CN top 100 contractors.

The survey was sent out on 31 March and closed on Friday 15 April. It was completed by 11 per cent (42) of those surveyed.

Readers' comments (2)

  • its hardly a scientific or representative study warranting headlines with a sample size of just 42 persons! And a small matter - its individuals who have the vote - not contractors. How about a little rigour in your approach?

    Unsuitable or offensive? Report this comment

  • Tom Fitzpatrick

    Hello,

    Thanks for the response.

    While the sample size is small, it was completed (anonymously) by more than 10 per cent of the senior leaders (almost all of whom are director level or above), we sent it to on a specially curated list.

    The idea of the Barometer is to get a snapshot of the train of thought amongst business leaders, which is what this does.

    Regarding the EU, we asked them to respond both as individuals, and to indicate whether their employers had a stance. We also asked about the impact, if any, of the referendum on projects. The survey had 23 questions in all, so I think it's unfair to suggest it was an exercise in chasing headlines! You can also see from a snapshot of the responses posted in the article that the people who responded were certainly engaged and weren't simply box-ticking.

    We are by no means saying this is exhaustive but it is interesting nonetheless.

    Best,

    Tom Fitzpatrick (deputy editor)
    tom.fitzpatrick@emap.com

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