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The coming year will favour flexible firms

Following the sudden 5.5 per cent fall on the FTSE on 22 January, we might all look back wistfully at the apparent stability of, say, two years ago and the buoyant forecasts then for the economy, says Chris Gilmour

At the end of 2005 the Government’s forecast for UK GDP growth in 2008 was between 2.75 per cent and 3.25 per cent. Government borrowing was forecast to be £31 billion.

Now the Government’s GDP estimate for 2008 is 1.8 per cent and public borrowing is predicted at £50 billion-plus. The CBI forecasts a tough year ahead as British business grapples with the global credit crunch and rising food and energy costs.

Turning to construction forecasts, the outlook is still for growth but some pundits have reduced estimates of 4 per cent to nearer 1 per cent - or even a plateau - owing to rising costs.

There are no givens but public frameworks such as Building Schools for the Future and ProCure 21 provide some comfort.

But they have the potential to be erratic as they are dependent on healthy public finances and political bottle.

So what does this mean for construction? The sector has had it good for the past four years. The headaches have been capacity and skills gaps.

2008 might be the year when some remember a lesson from pre-boom times: the sector cannot drive the market.

The strategies are straightforward: contractors that maintain a balanced portfolio of private and public work, spread across a range of sectors, will be best placed to survive.

Maintaining flexibility, retaining teams, being able to adapt quickly to changes and to diversify into smaller jobs to fill gaps in capacity are essential.

Managing costs, seeking efficiencies thorough partnerships with clients and supply chains, and adding value at every stage of a project are no-brainers.

Government must take notice of the importance of construction to the economy. The House of Commons Business Enterprise and Regulatory Reform Select Committee has just finished an enquiry into construction.

It is a safe bet that the report, expected in the spring, will identify steps the industry can take to manage the supply chain and simplify procurement.

As a major client, Government could lead the way.

Chris Gilmour is marketing director of HBG