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Company profitability climbs as contractors get recession boost

Company profitability continued to climb last year despite the ravaging effects of the global economic crisis, new data from Constructing Excellence has revealed.

Productivity also recorded a slight increase, the data showed, reflecting continued efficiencies within the sector.

Constructing Excellence’s annual key performance indicators, released yesterday, illustrate an industry more resilient than many would have expected during the worst economic crisis since the Great Depression.

Constructing Excellence consultant Martin Print said: “In collecting the data, we were expecting all indicators to be heading in a downward direction.

“And while there are a few worrying signs, the industry isn’t doing too bad considering.”

The figures revealed a jump in median pre-tax profitability from 9.6 per cent last year to 9.9 per cent in 2009. The figure represents a significant rise from the 4.4 per cent profitability being recorded by contractors back in 2000.

Mr Print said profitability had held up despite the recession because “traditionally contractors tend to get squeezed on the way out, rather than the way in”.

Many firms, including Balfour Beatty, declared bumper profits for 2008.

But he warned data in the coming years would likely show a marked drop the figures as contractors suffer increased supply costs.

Productivity also rose for the seventh consecutive year according to the 2009 data – with the median figure reaching £46,200 value added per employee, up from £45,500 last year.

Productivity levels have skyrocketed since the start of the millennium, where it stood at only £27,000 per employee.

Mr Print suggested the huge climbs in productivity had come from not only harder working employees but better efficiency across construction through collaborative working, supply chains improvements and an increase in the use of frameworks.

Warning that key indicators had the potential to worsen significantly in the year to come, Mr Print said: “The real question for next year will be do we carry on doing all the good Egan things we have been doing, or does it go back to being a dog eat dog world?

“I guess we will have to hold our breath for another year.”

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