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Major construction firms to market abroad to boost work prospects

A number of construction companies are likely to boost spending on marketing but a subdued forecast for the UK has prompted industry firms to promote themselves overseas.

More than 40 per cent of construction firms are increasing their marketing spending but many are concentrating these budgets on overseas opportunities, according to the latest industry survey from Leading Edge.

The majority of respondents, however, said they will still be concentrating on their core markets rather than expanding into new or emerging sectors.

The State of the Industry Construction Market Barometer research from Leading Edge and the Chartered Institute of Marketing Construction Interest Group also revealed that respondents are divided over sales volumes.

Almost half (45 per cent) reported a fall in sales volumes in Q1 2013 compared with the previous year, with 39 per cent saying sales had grown.

Construction marketing spending to rise

The quarterly survey revealed that 41 per cent of firms are set to grow their marketing investment over the next 12 months – almost double the figure of the previous quarter.

Leading Edge marketing spending Q1 2013

The findings reflect a growing optimism among respondents for the next six to 12 months, but also a sense that “there is nothing left to cut, as many are operating on their minimum levels”, according to Leading Edge senior manager Nick Hollaway.

He says the survey suggests sales and market performance in 2013 will be more positive than in 2012 for many firms, but some of the industry will still suffer from weak orders and subdued output in a number of high-value core sectors.

“There is limited growth in the UK, leading to a need to look outside the country for opportunities”

Nick Hollaway, Leading Edge

Mr Hollaway says an overwhelming theme from respondents this quarter was the intention to use more of their marketing spend to promote themselves in international markets.

“There is still a focus on the UK and companies will keep doing what they are good at,” he said. “But there is also limited growth in the UK, leading to a need to look outside the country for opportunities. There is a bit more confidence in sales growth coming from abroad.”

Focus on core markets

Winning work is still firmly fixed at the top of companies’ strategic agendas, but the importance of focusing on the core business has grown significantly, with 41 per cent of respondents stating it was a main strategic issue, compared with 26 per cent in the previous quarter’s survey. The issue to have grown most in importance was the recruitment, training and retention of the best staff.

Meanwhile, a newly added option – managing cashflow – was straightaway ranked as the third most mentioned across all the respondents.

Almost half of those surveyed said they expected their core markets to stay the same over the next six months.

Leading Edge core market expectations Q1 2013

But expectations were divided, with those operating in housing, repairs and maintenance and infrastructure more optimistic of at least marginal growth in their markets compared with those that operate in the commercial and public sectors, the majority of whom expected a marginal slowdown.

“The recent boost to the housing and mortgage market from the government has meant confidence has picked up among companies active in the sector,” Mr Hollaway says.

Output forecasts downgraded

The sentiment chimes with Leading Edge’s latest construction industry forecasts, which have been downgraded for 2013 and 2014. Construction output is now forecast to fall by 1.9 per cent in 2013 to £95.9bn – which would be the lowest value since 2000.

Growth will return in 2014, when output is predicted to rise by 2.4 per cent, before stronger increases in the following two years.

Leading Edge output forecasts Q1 2013

Mr Hollaway says the downgrades to the forecasts reflect the persistently subdued climate, citing the continuing decline in public sector new orders that is dragging down output, as well as the struggling commercial sector.

“The value of commercial output will have declined by 25 per cent between the sector’s peak in 2008 and 2016”

“The performance of the commercial sector is closely tied to the state of our economy and the world economy,” he says. “Investment levels are still relatively subdued and there is limited appetite for speculative developments.”

The forecasts predict that the value of commercial output will have declined by 25 per cent between the sector’s peak in 2008 and 2016, when it will be worth £23.9bn.

The retail sector is also perversely affected by the growth of the relatively low-value warehousing and distribution sub-sectors. These are expected to grow as the rise of online retailing and delivery initiatives such as click & collect mean the need for physical stores continues to dwindle.

Hope for private housing

Leading Edge is more optimistic about the housing sector, particularly private housing, with Mr Hollaway adding that pent-up demand and the availability of more mortgage funding will boost the market in the short to medium term. Private housing output is forecast to grow by 4.5 per cent this year, with growth accelerating the following three years.

However, the value will still be 19.3 per cent below levels in 2007 before the downturn and the number of units built is still not expected to meet the country’s demand for housing up to 2016.

Visit CNinsight for full dashboards outlining the results of the Leading Edge research and historical trends

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