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Competition looms for ‘usual suspects’

New entrants may soon break into to the top tier of commercial contractors, according to the authors of a supply chain survey illustrating how the industry’s largest players have weathered the recession.

Davis Langdon head of offices sector for Europe Iain Parker, who led the survey of 70 large contractors, believes the recovery will be marked by new contenders competing for the most prestigious jobs.

Mr Parker said: “The usual suspects which clients have come to know well might not be as fixed as once thought, and I think that applies both to main contractors and subcontractors.

“Most developer clients would have a similar list of names in mind for a large job, but I think you can’t now jump to that conclusion.”

Davis Langdon launched the survey to help clients “moving into a territory focused around their pipelines” and eager to re-engage with contractors who may have undergone substantial change in recent years.

Mr Parker said he was seeing clients ask for “different people on the list”, and demonstrate an “appetite to deepen the gene pool”.

“I do think we will see some companies making a step up and maybe some taking a step down,” he said.

Among the survey’s findings were the “significant variations” in contractor performance over recent years, after contractors were asked to provide annual turnover figures from 2008.

It also revealed that 12 contractors are targeting projects over £100 million. Of these Mr Parker said “only three or four” had a proven track record in the commercial offices market.

But he would not be drawn into speculation over which companies might see themselves promoted or relegated from the group. He pointed to the ongoing trend of headhunting and people movement as a major “influencing factor”.

He added: “The current environment is either forcing or enticing people from one company to another.”

Panmure Gordon analyst Andy Brown agreed the turbulent market conditions of recent years might lead to a change of approach from some developers.

“Clearly developers are looking carefully at their supply chains and they may change how work is tendered or awarded,” he said.

Of the traditional set of contractors associated with major commercial projects, few have come through the recession unscathed.

Lend Lease last week revealed its European arm had seen revenue fall 40 per cent in the 12 months to the end of June, with profit after tax down 55.8 per cent.

Laing O’Rourke has also suffered, last month revealing its profit had fallen 50 per cent and European head count was down by a third. But its recent win of the main construction package for the Cheesegrater has helped.

Skanska, which lost out to Laing O’Rourke, is still seeking a follow-up project for the £242m Heron Tower, which is almost complete.

Wates is one contractor hoping to climb the commercial construction hierarchy. Construction managing director for London Andy Wall said the company traditionally targeted projects worth between £15m and £60m but was ready to move up.

“We are targeting £50m-£150m projects. We are approaching it in a controlled way by building capacity and bringing in people with key capabilities who can complement our existing teams.”


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