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Painting by numbers: it’s not a pretty picture

Results this week from another five of the UK’s 10 largest contractors paint a vivid picture of the state of the industry – and it’s not pretty.

Carillion, Galliford Try, Interserve, ISG and Kier have different figures but they add up to the same thing: there is pressure on margins and pressure on cashflow. Profits are down in most cases and even contractors that are doing better must do ever more just to hold their position.

Rationalisation and restructuring continue apace – a logical reaction, arguably overdue. No one wants to see jobs lost, but pre-emptive action is better than no action at all. Nobody expected the pain to go on for a full five years and counting.

Very few are making a decent margin or managing to hang on to the cash that is the lifeblood of their businesses. The best contractors recognise that the solution is not to push out payment terms but to turn down work offered at untenable prices.

Many small and medium-sized businesses are struggling. The Bank of England figures out this week that showed net lending has fallen despite the introduction of Funding for Lending are simply proof – again in numbers – of what SMEs have suspected in their guts for months.

Construction minister Michael Fallon has been banging the drum for prompt payment and greater lending for months, threatening to name and shame banks – and contractors – that don’t lend or don’t pay when they should. Now would be a good time for him to make that threat real.

The latest construction orders data from the Office for National Statistics offer the only glimmer of hope: two consecutive quarters of slight growth. No one wants to say these numbers are the first signs of a recovery, but they lay the ground for cautious optimism.

Meanwhile Crossrail is determined to prove it’s not all about London, not only publishing its supply chain map showing how far across the country it extends, but actively inviting more far-flung contractors to get involved – there’s still plenty of work to be won.

If schemes backed by the government’s UK Guarantees start to come through, we could see more large-scale projects letting the benefits flow through the supply chain and across the country. The problem is, eight months since they were announced, the confusion over what qualifies seems to be growing, rather than diminishing. Let’s hope George Osborne can dispel the doubt in the Budget.

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