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Rocky recovery may call for bold business moves

Amid a growing sense of optimism in the industry, some of the UK’s biggest contractors have been keen to voice their concerns over the need to get a sense of perspective.

In its submission to the chancellor ahead of next month’s autumn statement, the UK Contractors Group warns that recovery in general construction is “fragile” and lagging two years behind the rest of the economy, including the welcome growth in housing.

Some commentators highlight the fact that growth is coming from a low base, with industry spending having been decimated in recent years. The north-south divide remains, some point out, and things get gloomier the further from the M25 you drive.

Order books up but challenges persist

Grant Thornton data shared exclusively with Construction News shows that in August, some of the biggest UK firms held their highest order books since the recession began.

“Reassuring shareholders over the state of order books, potential dividends and profitability in today’s climate remains a challenge”

But as high-profile clients increasingly use major frameworks, what happens to those major firms who miss out on work in their traditional heartlands? Do they rescale, or rethink their strategy? Do they look abroad to supplement falling incomes?

For listed contractors, reassuring shareholders over the state of order books, potential dividends and profitability in today’s climate remains a challenge.

Balfour shift

Some, such as Balfour Beatty, which is seen as a bellwether for industry as the UK’s largest contractor, have undergone a dramatic shift in focus.

The firm had problems in its regional divisions; it was forced to announce profit warnings and put in place a new leadership structure to try to sort out its difficulties.

Nick Pollard was appointed to lead the group’s UK business, spending six months getting to know the company and figure out how he wants to grow its construction revenue and offer “better value for customers and shareholders”.

The culmination of which is a reshuffle of its executive leadership team and a move to increasingly focus attention on regional contracts, rather than major infrastructure for which it says the visible pipeline looks “weak”.

A bold move then - one that has divided analysts’ interpretations, from some who question a growing focus on regional work which caused many of its problems in the first place, to those who say it’s a smart move as regional wins are likely to add strength in the short to medium term.

It is announcements such as those from Balfour Beatty, or Mears’ decision to divest of its M&E business, that are likely to be weighing on shareholders’ minds.

Bold strategies, by definition, come with risk. But it is these that can pay the bigger dividends in the future.

Readers' comments (1)

  • StreetwiseSubbie

    I see that Construction News are now censoring comments!

    Shame really I thought they were bigger than that...

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