Concrete specialists were struggling this time last year, with the top 10 achieving average margins of 2.1 per cent and a collective fall in pre-tax profits of around a third.
But a year later, the industry is back on a more even keel and margins for some specialists are showing signs of increasing despite some falls in revenue.
*Expanded Structures, part of Laing Orourke, includes demolition and piling, but concrete frame accounts for the majority of total sales
A J Morrisroe & Sons technical director Patrick Sharkey says the firm has had to put up its prelims, as labour rates have also increased hand in hand with the return to growth in the industry.
But margins are increasing notwithstanding rising employment costs, he adds.
Mr Sharkey says Morrisroe’s turnover this year was boosted by the high-end residential market – primarily in London – where the firm is almost at capacity in terms of resources.
Regionally, specialists say the market will continue to benefit from high-end residential work in the capital, but Mr Sharkey says work in education and commercial is growing in cities such as Birmingham and Manchester.
Positive sales forecasts
Mineral Products Association director of public & economic affairs Jerry McLaughlin says the MPA expects sales volumes of readymix concrete to increase by 3 to 4 per cent, with a similar trend in 2015 and 2016.
He says political uncertainty over projects like EDF Energy’s Hinkley Point C would be unlikely to have a major impact on the sector if they fail to go ahead, pointing to how the 2012 Olympics represented just 1 to 2 per cent of the market at the time.
Issues currently being managed but which could cause future difficulties include the number of available drivers and vehicles for deliveries on site, he adds.
Further uncertainty surrounding the general election could have an impact, as project spending traditionally dips in election years, but longer term the main issues will be around government policies on the cost of energy and the resulting impact on cement manufacturers.
Improvement from the bottom up
Mr McLaughlin says there is “no reason” why specialists would struggle to cope as the market improves, as it is coming from such a low base post-recession.
The EC Harris/Construction News Contractor Input Cost Index of construction materials and labour for Q2 2014 showed concrete prices rose by 0.9 per cent in the quarter.
“We have seen a major shortage of both and our concrete suppliers can no longer guarantee they can supply them to us”
Patrick Sharkey, A J Morrisroe & Sons
While the national average price was £81 per cu m, London’s figure represented a significant premium at £105 per cu m.
But some specialists are having to go back to clients to ask them to consider switching certain types of concrete on jobs, as material shortages begin to bite.
A national debate has emerged about a shortage of bricks for housebuilders, generated by improvements in the housing market and demand for new homes over the past couple of years.
But Mr Sharkey notes that Morrisroe is increasingly having to go back to clients to ask them to consider alternatives to pulverised fuel ash (PFA) and ground granulated blast furnace slag (GGBS)-based concrete, after suppliers have pointed out a severe shortage of both materials.
“We have seen a major shortage of both and our concrete suppliers can no longer guarantee they can supply them to us,” he says.
Morrisroe has not been forced to look abroad for alternatives to UK-produced concrete yet, he adds, but is trying to persuade clients where possible to only use PFA and GGBT for schemes where they serve a technical purpose, rather than traditional Portland-based concrete solutions.
Both PFA and GGBT have sustainability and cost benefits in concrete, he continues, but Morrisroe is trying to use other methods to save money and asks clients to consider post-tension concrete rather than in-situ reinforced concrete solutions to take advantage of its in-house PT design and installation expertise.