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What 2009 holds for the construction sector

Our experts map out their predictions for the year ahead

What are your feelings about the year ahead generally?

Vaughan Burnand, director at Constructing Excellence, says:

I think major contractors that have been saying they are OK for work will notice a major shortfall for this year and this will lead to very competitive conditions.

MIPIM will be mixed, with half saying they can’t afford it and half saying they can’t afford not to be there. But attendance will be up on last year. Supply side, prices will fall quite dramatically but work will still be hard to come by. House prices will stabilise at a low level causing a drought to everyone involved in building houses.

More bricklayers will become taxi drivers.

Garvis Snook, chief executive of Rok, says:

In my view, the industry will be 30 per cent smaller this year than in 2007. That will mean more than 30 per cent of jobs will go as efficiency improves. Once many of the migrant workers have left for home [the downturn] will bite deep into the indigenous workforce. Last time, the industry lost 350,000 skilled people who never returned.

New entrant numbers will almost stop. Just like last time, many new graduates will look to industries other than construction to develop their careers. This time though, it is a world-wide recession with even the property boom in Dubai grinding to a halt.

I remember the recession of 1989 to 1993. For months, years in some cases, many in the industry tried to deny what was happening. I hear the same things this time but the difference is the phenomenal speed at which we have fallen into recession and the unprecedented depths we have yet to plum.

Nobody working in the industry today has ever experienced anything like it. Many, particularly if they are white collar and working on site for main contractors, have felt little of it yet. They will currently be making good returns because sub-contractors and material prices have dropped. Reality will strike this year.

While this sounds very grim, we must remember it is only a passing phase. Things will get better again and I do expect small green shoots of recovery beginning to appear late in the year.

Catherine Tallis, project manager at Mace, says:

There can be no doubt that the year ahead will be tough. The outlook is challenging, with intense competition between companies trying to secure contracts.

The construction industry is battening down the hatches to weather a storm that could be bigger and longer-lasting than anticipated.

That said, companies working within the public sector will potentially have an easier time. There are a number of major projects in the pipeline and the possibility of more if Gordon Brown sticks to the [free market] approach he has tabled.

Chris Haughey is managing director of groundworks contractor CJ Haughey and a Construction News Future Leader in 2007. He says:

There is going to be less work to go round and the work that is available will have an increasing number of companies tendering for it. This will have the knock-on effect of driving prices down, which I hope will not affect quality. The public sector could be the saving grace with continued work but it will be sporadic.

Some firms will have good order books for next year but this is only good if the planned work proceeds on time. While every company wants to plan growth, I know of many which are planning survival.

How will companies have to work differently?

A Karen Gill is founder of business resource Everywoman and was made an MBE in the New Year Honours list. She says:

All companies will have to be prepared to more than triple their activity for the same results. Sounds depressing doesn’t it? But we’ll get used to it. In essence it will mean having a real focus on sales and business development.

Being in the market and front of mind of your clients will be vital to ensuring their loyalty and custom. Not just to see you through the downturn, but essentially, for when the market turns. Any business leader that doesn’t beef up their sales and marketing activity
will do so at their peril.

What is becoming clear when I speak with business leaders is that there will be a need to get your head down and focus.

One said they had done a ‘recession audit’ and identified the three key areas they wanted to the team to focus on and eliminated some parts of the business they don’t see working profitably.

We will need to keep having these meetings with our teams, pulling on their ideas and creativity. Innovation comes from accepting current models no longer work, which generally happens in a downturn. So I think it’s going to be very exciting.

Garvis Snook says:

Firms will have to be very lean, mean and innovative to survive, let alone prosper.

There will be a greater demand for maintenance and repair and while tender prices in construction are already being slashed, this will only get worse. Some will fall over because a customer or two falls over on them. So we will all have to be careful who we give credit to and then outperform and love our customers more than ever. If we don’t, there are many others lined up behind us wanting to eat our lunch.

Vaughan Burnand says:

People in this industry are cynical for a reason. I have been in the industry for 33 years since university without a day’s unemployment but I am one of the lucky ones. It’s a shame that we have too many senior managers not willing to learn more efficient ways of working that would prevent this cycle.

I am not fed up of saying it, but contractors will have to invest in working in a different way: lean design and lean construction. We often say that companies need a sense of urgency to change. What more do companies need by way of a message to get started on getting more from less.

Universities are now producing the numbers of people that the industry asked for - and well done to all who put that effort in. I hope we open our eyes and innovate for this intake and offer them a variety of opportunities at all levels so that they get essential experience if only to see whether they like the industry. Let’s drop the expression 'over qualified’ for a couple of years!

Catherine Tallis says:

Firms will need to be prudent, ensuring that their portfolios are varied and their staff flexible. The industry will inevitably need to tighten its belt and individual companies will need to undertake thorough reviews of budgets and pipeline projects to plan for and minimise the impact of the downturn.

New markets are likely to emerge as the recession deepens and survival may depend on firms being ready to diversify and looking outside the UK to cash-rich economies.

What about the effect of the downturn on graduates and apprentices?

Chris Haughey, says:

Graduates must be feeling quite unsure of what to expect – having studied for years and now finding the industry they have committed to is in a major downturn and the job they are seeking might not be there.

But companies still have to plan for the future, the industry will recover and we will need a skilled workforce, so companies will have to train the next generation. The problem is that training budgets will be cut and we may have to wait some time for things to improve.

In terms of apprentices and encouraging young people to join the industry, the Government has been spending a lot of money and has ambitious plans. I know some of the major schemes are still in their infancy, but the downturn could turn people away. There will be major challenges to make sure the industry still has mass appeal to school leavers.

The construction market isn’t the only industry that is suffering, but it is the one that has taken the full force of the slowdown.

Catherine Tallis says:

Although less enlightened companies are likely to cut back dramatically on the 2009 graduate intake, the downturn is potentially a golden opportunity for top graduates.

In an increasingly tough market, they can prove their abilities to employers by stepping up and taking on jobs that they might otherwise not have had the opportunity to work on.

The industry has some of Britain’s brightest and best and this is their chance to shine and build their careers within good companies. This recession is likely to last long enough for graduates to demonstrate their abilities and be well placed once the next boom commences

To see a video interview with Garvis Snook click below:

Video: Rok's Garvis Snook on why a recession may not be a bad thing for construction