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Do you feel lucky, punk?

Tom Fitzpatrick

What a difference a year makes. Between the collapse of major players, cost and programme uncertainty on major infrastructure upgrades, financial constraints and political uncertainty, the sector is now looking forward to 2019 with a mixture of steely determination and understandable trepidation.

Lending to the sector is a huge concern. At the moment, with Brexit still the sole focus in Whitehall, the government lacks the authority or resolve to intervene when it must.

If money is switched off to a construction sector faced with rising labour and material costs and continuing to be squeezed by clients, the economy will suffer.

It’s right that companies should have to prove they have a solid balance sheet and that money won’t be squandered on misguided ventures, swollen remuneration packages or the wrong acquisitions.

But if lenders are simply demanding more return for even less risk because they got their fingers burned by Carillion, it will all end in tears.

When companies the size of Interserve, Kier and Laing O’Rourke are trying to plot a return to financial norms but having the rug pulled from under them, everyone in the sector should be concerned.

The companies sit on combined revenue in excess of £10bn according to their latest accounts, employing tens of thousands of people.

In recent weeks though the industry rumour mill has shifted from one of the firms being doomed, to greater confidence that they will all pull through.

But at what cost?

My bet is that you will start to see some significant changes in boardrooms across the wider industry.

There’s a demand from government as the industry’s largest client, as well as from the financial sector, supply chains and workers, that the industry operate in a different way.

And this is in a sector where the people at the top have invariably worked in the industry for decades. While there are many brilliant leaders in their own right, this sector needs new blood to transform it and there are some who won’t be up for the fight.

The turnaround job at Balfour Beatty is testament to the idea that leaders can come into the sector and make businesses operate more intelligently and more profitably.

Next year is going to be extremely tough. Those companies who have banked on increasing civils orders are now faced with cost-cutting on major programmes like Tideway and HS2. Programme problems remain on major sites from Crossrail and the Northern Line Extension to Tottenham’s new stadium.

Many companies are looking forward with confidence, but the sector is set for a shake-up and it’s hard to say with confidence who is best placed to benefit in 2019.

The industry will be subject to greater scrutiny by the national media as it oversees projects with rising costs in an uncertain political climate. 

If construction is not given the support it needs, there will be massive ramifications for the UK economy. 

But order books are strong and the appetite to do better is there. And hey, only another 100 days of hanging around for Brexit to go… unless…

The CN Briefing will return in January

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