The construction contracting industry has
experienced good growth since 2013, as a result of relatively buoyant construction
activity across several end-use sectors. In particular, the infrastructure,
commercial office, education and entertainment sectors have performed well in
recent years, with infrastructure projects accounting for over 40% of the value
of contracts awarded in 2016. More recently, however, the number and value of
contract awards have been lower than in 2015, indicating a slowdown.
Despite
the growth in recent years, the contracting industry is facing a number of
challenges, including significant labour shortages, in particular with regards
to skilled tradesmen, across all areas of the country. In addition, the impact
of Brexit on the construction industry is expected to be most significant on
the long-term supply of capital and labour into the UK, and potential changes
to immigration policy could widen the supply gap in the labour market.
The leading UK
contractors in terms of turnover are Balfour Beatty, Kier, Skanska, Multiplex,
Willmott Dixon, Carillion and Galliford Try, Morgan Sindall and Laing O’Rourke.
Together, the top 30 contracting firms accounted for over a third of the total
work awarded to contractors in 2016/17.
Contractor
margins remain under significant pressure in 2017 as a result of rising
material costs and wage inflation, and this has led to some restructuring in the industry. In addition, the fall in the value of Sterling has meant
that UK firms have become more attractive to overseas firms, especially
where there is a long-term pipeline of major infrastructure work, and in recent
years there has been significant consolidation activity in the sector.
There is a growing
political and economic uncertainty concerning the EU withdrawal and contracting
firms currently remain cautious about future workloads. With competition for
construction work now stronger than ever and large-scale construction contracts
now few and far between, main contractors have been considering lower value contracts
in a bid to maintain workloads. This has led to intense competition also with
smaller, regional companies competing for small and medium sized contracts.
Hayley Thornley,
Research Manager at AMA Research, commented:
“Going forward, growth in the contacting industry is
likely to be underpinned by opportunities in large-scale infrastructure, public
sector and private residential work, as new private commercial sectors suffer a
slight slowdown. Major construction contracts are increasing in size and
complexity, and by 2021 the construction industry is expected to have undergone
significant consolidation - driven by the larger UK players as well as interest
from overseas firms - resulting in several larger multidisciplinary players
with the necessary scale to handle larger and more complex projects“.
Many end use sectors are expected to support growth with
positive outlook in sectors such as infrastructure, entertainment & leisure
and the health sector. However, this will be partially offset by the more
subdued performance from sectors such as retail, which may suffer from reduced
consumer confidence levels, along with lower output in commercial offices and
education. The market is also expected to be impacted by the increasing
economic and political uncertainty surrounding Brexit.
The ‘Construction
Contractors Market Report – Focus on Sector Capability and Strategy - UK
2017-2021 Analysis’ report is published by AMA Research, a leading provider
of market research and consultancy services with over 25 years’ experience in
the construction and home improvement markets.
The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242
235724.
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