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Marketing spend to grow but headcount stable as skills threat rises

Construction firms are set to grow their marketing spending and company sales growth has peaked, but cut-price bids and the continued fear of skills shortages remain threats to company performance.

The Q4 2013 State of the Industry Barometer, by construction research consultants Leading Edge in association with the Chartered Institute of Marketing’s Construction Industry Group and Construction News, found that 79 per cent of respondents were positive that their company’s sales will improve over the next six months.

This was the highest level of positivity since the survey began in 2008, while 79 per cent reported that they had seen their sales already improve compared with Q4 2012.

Leading Edge senior manager Nick Hollaway says: “We’re still quite a way down on 2007, but compared with a year ago there is a lot of positivity.”

Pricing and skills remain threats

The barometer continued to show that a lack of resource with which to respond to market or client demand resulted in a number of firms turning away work.

The percentage of those citing a lack of resource as a barrier to winning work was stable in Q4 at 46 per cent, down slightly from 47 per cent in the previous survey.

“Companies really need to review carefully whether they want to commit to work at a certain pricing level”

Nick Hollaway, Leading Edge

“We expect aggressive pricing and a lack of resource to switch in importance over the next six months,” Mr Hollaway says.

“Labour is a major issue, and there are difficulties for firms in being able to find the staff to carry out the work, particularly in the housing sector.”

Almost two-thirds of respondents cite aggressive sub-price tendering as a major challenge.

“Aggressive tendering ultimately reduces your margins, so companies really need to review carefully whether they want to commit to work at a certain pricing level, as you don’t want to find out in a year or two that you cannot cover your costs,” Mr Hollaway says.

He suggests a longer-term strategy for resource planning and bid pricing of around three to five years is necessary, “particularly in construction where projects can run over a number of years”.

Brighter prospects

Three strategic issues were considered more important among respondents in Q4 than they were 12 months before, including recruiting, training and retaining staff, managing cost rises and breaking into new markets.

“The downturn has meant companies are now much more focused when it comes to targeting work and seeking new opportunities,” Mr Hollaway says.

“At the beginning of 2013, when the industry was at a low point, there was a still a survival mentality and companies needed to remain stable. There are more opportunities around now and companies are really starting to gear up to invest.”

London and the South-east remain the regional engines for growth, but Scotland saw the largest rise in the number of respondents expecting increases in sales over the next six months.

One respondent remarked that Scotland was “becoming a bit like London”. Mr Hollaway says there is evidence of growth in other regions, but that they are not yet “booming”.

Government needs to gear up

The State of the Industry Barometer respondents were asked what they wanted from the government to support industry growth.

More than half said the government needed to work harder to secure private investment to finance major projects, while 48 per cent wanted it to do more to identify a future pipeline. Just 8 per cent said the government was doing all it could at present.

“More than half feel the government needs to work harder to secure private investment to finance major projects”

Respondents were also asked to identify what they wanted to see from trade bodies and the industry. Emerging themes included lobbying for a strategic infrastructure plan, educating clients and strategies for training and apprenticeships.

“It is about explaining to clients that you can buy a building cheaply, but a less adequately designed building will probably cost more to maintain in the long term,” Mr Hollaway says.

Marketing spending is critical

The research found that just 4 per cent of firms were planning to cut their marketing spending in the next year – the lowest percentage since the survey began, while 69 per cent forecast a rise in budgets, with more than a third expecting this to be more than 5 per cent.

However, these increases in spending are unlikely to go towards marketing staff numbers, with 62 per cent expecting no change in headcount.

“Companies are investing and recognising the need for key marketing activities to help maintain and drive growth,” Mr Hollaway says.

“They are more cautious about investing in marketing staff, and are looking for more effective and efficiently run marketing strategies.”

Overall, 86 per cent of those surveyed considered their company to be in a good or very good position to take advantage of the expected upturn across the industry this year.

One respondent said: “We have been building for this since the downturn. We adapted quickly then and will now.”

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