More from: The Construction Top 100
Last year, chiefs at the UK’s Top 100 contractors were split in their opinions about how healthy the economy was looking. In the end, a slight majority of hawks predicting a downturn outweighed a smaller number of hopeful doves hoping for continued growth.
But this year, as the results of our 2008 survey show, those doves have flown away, driven by a year of relentless bad economic news.
Of the 100 senior executives polled by Construction News, there was not a single one who felt that the economy was set for growth in 2009.
The gloom is best illustrated by digging into the bosses’ predictions for the various sectors that they work in.
Having experienced a decade of consistent growth, this is a question that has tended in previous years to produce some pretty bullish results. Given that understanding your market is a key part of a senior executive’s job description, these previous predictions have usually turned out to be pretty much on the nose.
This year, the downturn in the private house building sector means that there is no great shock that industry chiefs are predicting further turbulence for the nation’s home builders.
Similarly concerns about the commercial and industrial sector have been well documented as the global finance industry draws back on its requirements for new office space, and consumers start feeling the credit squeeze.
But even sectors that had been predicted to counter the downturn are now looking static at best, with major programmes for public sector building in schools, health centres and prisons unable to rouse hopes among those surveyed.
Not so great expectations
And strong expectations for the public housing sector in last year’s survey have now gone into reverse; the Government may have plans to vastly improve social housing but the Construction News Top 100 chiefs do not share this confidence, with more predicting a downturn in this market than a revival.
One senior executive illustrates a worst-case-scenario associated with falling public spending: “If the credit crunch challenges within the banking sector eventually drive a full blown recession in the UK, to the extent that the public sector and regulated industries are forced to scale back their investment plans, that would change everything.”
Another warned that even if public spending held up, the rules of the game might change, saying: “Public sector procurement changes towards best value over the last five years are helping drive innovation and quality.
“I do hope that a tightening of the economy doesn’t encourage public sector procurers to revert to ‘cheapest price wins’ as that would destroy much of what has been achieved.”
All of this negativity has created a grim picture summed up by the survey results for expectations of total workloads and the financial health of the industry in 2009. In both cases those with worsening expectations outstripped those expecting an uplift by nearly 30 to one.
So where does the blame lie for these conditions?
One executive points the finger at uncertain workloads combining with rising input costs, saying: “Raw material costs have previously had little impact. Now the markets are quite volatile, the global impact and influence is huge.
“Unless costs stabilise, the industry may grind to a halt despite there being projects ready to construct as they will not be financially viable.”
Perhaps, given these conditions, it is unsurprising that firms are keeping a very close eye on their figures.
In common with previous years, the Construction News survey has shown the rising importance of cash flow as a measure of financial performance – above profits, profit margins or return on investment – with those surveyed also seeing raw turnover again falling in importance relative to the other measures.To download an overview of what company leaders think about the outlook of the industry, click on the resource box on the right hand side of the page.