With total output expected to grow by 3-5 per cent in 2014, the outlook for the construction industry is looking more positive than it has in years.
However, the State of the Industry Barometer, run in association with CIMCIG, has revealed a number of key trends that companies need to be aware of and prepare for, in order to make the most of the upturn.
Focusing on recruitment and training is key
- 44 per cent of companies said recruiting, training and retention of staff was a key strategic issue, a 175 per cent increase in the figure 12 months ago;
- 46 per cent of companies cited lack of resources to meet demand as a major barrier to wining work this year.
With around half of industry struggling to meet the recent pick-up in demand, on top of the long-term skills gap that continues to build, this is an issue that is unlikely to go away.
This means companies need to ensure they have a long-term strategic plan in place to review where the gaps are in terms of skills and resource levels.
This review should be undertaken in the context of the long-term pipeline of opportunities and the dynamics of the markets they are working in.
This allows early identification of potential shortfalls and reduces the risk of having to turn down opportunities, or worse still, carrying out sub-standard work due to a lack of skilled personnel.
Initiatives to work effectively alongside industry bodies and the government to retain and attract talent need to be developed to ensure a new generation of skilled talent is available to deliver the infrastructure (eg nuclear, HS2) and buildings the nation needs.
Managing the impact of aggressive tendering
- 62 per cent of companies stated that aggressive tendering is a major barrier to them wining work, although this figure fell 5 percentage points from the last survey;
- 25 per cent of companies said this area was a top strategic priority for them in 2014.
Despite the upturn, some companies are still putting in very low price bids which increases pressure on margins already being squeezed by recent increases in labour and material costs.
Successful strategies to negate this include:
- Having a clear plan in place for which jobs to target to increase the win rate and avoid costly procurement processes;
- Effective targeting of key clients to build long-term relationships with increased emphasis on service and value;
- Continuously educating customers to consider life costing over lowest capital cost;
- Partnering more closely with the supply chain to look for efficiencies to drive down costs without comprising on quality.
Marketing investment is set for growth
- 69 per cent of companies are planning to increase their marketing spending;
- 33 per cent of companies are looking to grow their marketing headcount.
Marketing is usually one of the first areas to be cut when sales and profit budgets are under threat. However, the majority of companies are now increasing their marketing spending as their sales prospects improve.
This is partly due to the fact that it is less risky to increase marketing spending, which can be gradually increased or decreased, compared with headcount, which tends to be more fixed.
Marketing executives can use the results of the survey as evidence to help support any requests for additional budget to take advantage of the new opportunities.
However, ‘doing more with less’ is now the key mantra and ensuring each pound spent can be justified to the senior team should be the central focus when companies are reviewing their marketing strategy and plans.
The State of the Industry Barometer tracks marketing budgets, headcounts alongside sales and market performance and is completed by 50 - 100 senior executives from the construction industry on a quarterly basis. An executive summary of the latest report is available at: www.lead-edge.co.uk/downloads-and-reports/state-construction-industry-survey
Nick Hollaway has more than 12 years of experience in the construction industry and is now a senior manager at Leading Edge, a market research and strategy consultancy specialising in the construction and building materials sectors. Nick is an experienced project manager and chartered marketer and is also a member of the organising committee for CIMCIG