Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Expect industry’s new leaders to look inwards

Construction is on the move. HR departments have been in overdrive as contractors and consultants wave farewell to the old guard and welcome new CEOs and directors to the boardroom table.

Sir Robert McAlpine, Vinci and Willmott Dixon are just three of the more high-profile firms with changes at the top, along with today’s long-awaited appointment of a new chief executive at Balfour Beatty.

Among consultants, Dean Webster at Sweett has brought forward his retirement, while Aecom’s global head of building engineering David Glover is leaving for a new role.

Pinch points

The changes come at a particularly challenging juncture for construction, after the recession ate away at margins and profits.

As the industry returns to growth, contractors are bracing themselves for a dangerous time in the cycle as they build out so-called legacy projects with soaring costs to contend with.

As EC Harris reports, price rises are at their highest in four years and contractors across the country are scrambling for key subcontractors.

“We can certainly expect to see a greater internal focus, even a more introverted industry, as these new brooms get to work on the numbers”

An analysis of the largest UK construction contractors by KPMG found that despite higher contract activity, the financial position of many contractors remains weak, with cash balances and margins down.

Net cash balances declined in 2013, according to the report, and are now close to half their 2010 peak.

Cash generated from operations has all but dried up since 2010 and cash balances have been increasingly supported by significant sales of assets.

Operating margins have fallen from a high of 2.8 per cent across the industry in 2010 to an average of just 1.2 per cent in 2013, with persistent inflation in subcontractor markets suggesting pressure on margins is unlikely to ease off any time soon - as we’ve seen from a number of recent profit warnings.

Early days

So what are the skills and priorities likely to be for the new leaders?

We can certainly expect to see a greater internal focus, even a more introverted industry, as these new brooms get to work on the numbers, winning over staff and figuring out who they can trust.

Vinci has already announced widespread restructuring and one imagines there will be a few nervous personnel at middle-management level in many firms just now.

With more opportunities out there, new chiefs will need to develop a strategy for growth - but in time.

They would best be guided for the moment by an old adage that was forgotten during the downturn: turnover is for vanity, profit is for sanity, but cash is king.

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.