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Reasons to be cheerful

Binyamin Ali

This has been some year for the construction industry, but is hasn’t all been bad news.

Between the liquidations and administrations that have afflicted the likes of Carillion and Lagan Construction Group, the debts piles and capital constraints at Interserve and Kier, it can to easy to miss the good news among all the bad.

For example, when the chancellor Philip Hammond abolished PFI/PF2, it was frustrating news for all the projects in the pipeline on which a PFI funding model was scheduled to be used – not least two of Highways England’s flagship schemes.

But as we all well know, the benefits of PFI have been called into question for some time now (Liverpool City Council paying £4m a year for an empty school is the classic example of bad PFI) and there is now a need to look at alternatives.

The construction minister has suggested that the regulated asset base model being used on the Tideway tunnel could be the future template.

If it can bring private money into infrastructure projects while protecting the public purse, this may well lead to more projects (only six PFI deals have been commissioned since 2012 when PF2 was introduced).

Closer to home, despite the margins of the top 10 biggest contractors by turnover falling from -0.5 per cent to -0.9 per cent, many of the industry’s smaller (albeit sizeable) firms have done extremely well.

Among those turning over £300m-£500m for example, the magic 5 per cent margin is being hit and exceeded by some prudently run businesses (the UK’s largest contractor Balfour Beatty appears to have found a winning formula too).

Among the industry’s specialist contractors meanwhile, the top 10 firms in six out of the seven specialisms CN monitored saw their median margin increase too.

Attitudes to diversity, modern methods of construction, mental health and wellbeing are improving too (albeit slowly) and the weekly projects that CN has featured (but haven’t made national headlines) have been phenomenal.

The point is that, despite all the negative news surrounding the construction industry, good things have also been happening at client and contractor level.

Brexit and the financial stability of the industry ensures 2019 will be a big and challenging year for every industry in Britain – the good news will also be there again, as always, for those willing to see it.

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