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GMI boss warns over margin wars

The head of a Leeds-based construction firm has warned that subcontractors are being put under unmanageable pressure during the economic downturn.

GMI Construction managing director Jarrod Best said main contractors were squeezing their margins so far they sometimes could not pay subcontractors for work completed.

He claimed he was aware of situations where subcontractors had been told they could not be paid for work, but would be offered more work to make up for the loss of earnings.

“We have seen a lot of companies that have gone bust and a lot of people will have sat back and waited for it to happen.

“When you are in a tender situation and repeatedly being beaten on price by companies with far larger borrowings you do question how [they are going to make it pay].

“There have been some horrific stories out there recently. Larger contractors tend to have the voice of the industry and while they have done a good job in terms of changing the industry, my concern is that there are genuine people within the industry hoping their livelihoods aren’t ruined.”

Mr Best said that in the current economic climate, GMI Construction has had to adopt an increasingly stringent due diligence process with its own subcontractors.

“We often ask for parent company guarantees because in some cases you have to wonder whether the companies will be around in six months’ time,” he said.

“We use a lot of companies who are known to us but when you hear of new subcontractors offering a fantastic price these days, alarm bells start ringing and people know when they are buying into trouble.”

GMI Construction was established 25 years ago and Mr Best said it was in a strong position because it had stuck to its principles.

It boasts a 90 per cent repeat client ratio and has worked across the public sector on projects including the Excel Logistics centre in Glasgow and Tesco distribution centre in Lichfield.

Current projects include construction of the Rotherham Metropolitan Borough Council civic buildings, due to be completed in September. Construction of Rotherham United’s new £20 million football stadium will get under way later this year.

The company is also targeting retail work while delivering a sustainability agenda that has seen buildings awarded BREEAM Excellent ratings.

Mr Best said working out of one office continued to suit the firm.

“We have worked all over the UK from Scotland to Surrey and are looking at projects everywhere, we are committed to what we do and I’m not convinced that we would be better served through regional offices.”

 

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