The 2017 CN100, published by Construction News, makes some interesting but troublesome reading.
Whilst turnover is up within the UK's 100 biggest contractors, profitability has barely risen overall, and within the top 10 UK contractors, the average profit margin is -0.5%. That's negative profit; contractors are essentially paying for the pleasure of constructing the UK's infrastructure, buildings and public realm.
This picture isn't new.
I wrote an editorial for the 2016 CN100 and argued that the UK's biggest contractors were spread to thinly, being generalists rather than specialists the sectors they operate in, and in my mind that issue still rings true.
But, in my mind, the UK client base has a big role to play in the economical sustainability and stability of the industry.
Over the past year I've been fortunate to support a number of contractors featuring in this list on tenders for major public sector projects and unfortunately price is still the deciding point on many tenders. Whilst clients may say they're applying a 70/30 quality/price split, when all bidders are marked almost the same on quality, price ultimately becomes the deciding factor and the industry knows this.
Client organisations have to recognise that buying cheaply not only puts them at risk of getting an inflated out turn cost and poorer quality buildings, but they also contribute to a negative cycle of low margins and pricing to win which ultimately is starving the industry of the ability to innovate, modernise and transform into an industry that can attract and retain the best talent possible and which can rapidly adapt to new technology, innovation and market changes.
If the UK construction industry’s top 10 largest contractors had combined their most recent turnover figures, they would have posted a revenue of £31.9bn. At the same time, combining the pre-tax profit/loss figures for those same 10 companies would leave you with a loss of £52.9m – and an average pre-tax margin of -0.5 per cent. Those figures are a damning indictment of the troubles that have rocked some of the industry’s largest contractors in the past 12 months, all of which is reflected in this year’s CN100.