Leading subcontractors have claimed that busy order books and stretched budgets are causing project delays for end clients and changing their approach to pricing jobs.
CEOs from structural steel specialist Severfield, cladding and building envelope contractor Lakesmere, and ground engineering specialist Van Elle, spoke of bulging order books and their increasing selectivity over projects at the Construction News Summit.
“I think we’re finding the pipeline is as strong as we’ve seen it for quite some time,” Severfield CEO Ian Lawson said.
But he warned that some larger contracts were taking “longer than expected” to come to fruition.
“The end client wants to make sure the budgets are absolutely robust. Personally, I think that’s causing the delay,” he said.
“It’s not a bad thing from the client’s perspective that they have certainty over the budget – [but] what we really need is confirmation that the job is going ahead so we can plan our resources.”
Lakesmere CEO Mark Davey said that the upturn was “London-centric” for sure, but that a ripple effect was evident in other parts of the country, leading to more work in major UK cities.
On growth, he said that growing the company “eats up cash”.
“We’re finding more and more with our supply chain that they’re very keen on [prompt payment] and getting cash,” he said.
“Likewise with our main customers - and we’re selective over who we work with - there are some who are playing with cash at the moment for their benefit.”
Van Elle group CEO Jon Fenton agreed, highlighting the tension between some main contractors’ low-margin jobs and the fact that subcontractors are able to be picky over work.
He said: “We still suffer from recessionary pricing from the main contractors. Some of those jobs at low prices are coming to fruition, and they’re expecting those prices to be held.
“Main contractors are stuck with low pricing – there’s a lot of work out there at the moment, so the subcontractors don’t have to be as hard as they used to be on the pricing.”
All three said that they were not having to rely on banking facilities at the moment for capital, with Mr Davey even saying: “We don’t do banks.”
Mr Lawson also warned that the terms and conditions in some contracts were being used as an “excuse” by some clients over payment, particularly when it came to disputes.
On innovation, all three panellists agreed that in-house design expertise at specialist contractors was not being used to its full potential by contractors and consultants.
Mr Fenton said that early involvement in projects was “key” and that specialist contractors have a range of techniques that can help “improve on programmes and save money”.
“That’s one of the frustrations – that we don’t get involved until the very last minute at the bidding stage,” he said.
Mr Davey said that the modern construction industry now saw more collaboration between tier one and tier two firms, but added: “There’s always an element of confrontation lurking in the background.”