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2016 preview: Industrial

The industrial sector experienced a significant reduction in spending during the downturn but there are a number of reasons to be optimistic for 2016 and beyond.

Throughout 2015 we saw a big increase in industry spending compared with 2014, with growth of 18-20 per cent over the past year in key regions such as the Midlands, as well as the North-west and South-east.

As the market and wider economy continues its recovery in 2016, the industry will become more competitive as contractors take advantage of this growth area and look to expand their future order books.

New entrants

Despite this, the potential opportunities in the sector are encouraging, with new business and clients looking to enter the market.

“We have seen that clients are beginning to struggle to find construction partners with suitable experience to develop smaller units as the average project size across the sector increases”

The CITB is predicting the transport and storage section of the sector will expand by 2.6 per cent a year on average, indicating a much stronger demand for distribution and logistics facilities than in previous years. The increase in demand for online shopping in the UK is inevitably leading to companies improving their service by increasing the number of warehousing and fulfilment centres across the UK.

We have seen, however, that clients are beginning to struggle to find construction partners with suitable experience to develop smaller units as the average project size across the sector increases and contractors become focused on larger schemes. The last 12 months have seen clients expanding their offering into smaller multi-unit schemes, particularly around the M25.

Varied solutions

Among the challenges we are likely to see in 2016 is the continued skills shortage among contractors and subcontractors in the industry. This has been an issue for a number of years and one companies are seeking to tackle by attracting talent into construction from other professions and ex-military.

This is combined with the efforts to develop the talent already in the industry or entering the sector through higher education or apprenticeship schemes.

With the market becoming busier and more competitive, we are increasingly seeing developers bringing contractors on board earlier in the build process. They have also begun employing a two-stage tender approach for complex projects in order to secure commitment from contractors and the wider supply chain.

As always, developing key client relationships and offering integrated services will be crucial in 2016 as we see clients continue to choose contractors that have a reputation for delivering quality and innovation.

David Sershall is managing director of VolkerFitzpatrick’s building division

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