Contractors urged to invest in 2016 for long-term work boom

Grant Prior 5 months ago
Share

A leading construction expert is calling on the industry to start to invest in the future as 2016 spells the start of a long-term industry boom.

Theme graph up growth construction
2016 is time to invest in construction's future

Richard Threlfall, KPMG’s Head of Infrastructure, Building and Construction, said: “2016 will be a good year for the construction industry.

“Tier 1s will stabilise, labour supply and price pressures will start to ease, and the industry should be able to start focussing on securing steady growth in what will be a strong market.

“It will be a year for businesses to invest, in people, processes and technology, to create a platform for what could be many good years ahead.

“2015 has been a particularly ghastly year for many Tier 1 firms, who have been knocked off-course by losses on legacy contracts signed too cheaply in order to maintain volume in the depth of recession.

“But it seems unlikely now that there are many more skeletons in the cupboard and as restructurings of businesses in the sector work through, a degree of stability should return.

“A more stable construction industry will be able to take advantage of a strengthening market. Recent months have seen output dip, and forecasts have been revised downwards.

“But it is clear that this is not reflective of underlying demand, which remains strong, particularly in commercial and civils.

“That demand is being suppressed by rising wages, which are causing clients to delay and re-scope schemes.

“Eventually recruitment into the industry will start to dampen that cost pressure and supply and demand will gradually move back towards equilibrium over the course of 2016.

“Weak profitability in the industry won’t improve overnight, but we can expect to see steady growth in order books and gradually improving margins.

“For the supply chain, the outlook is really good. Companies that have real specialism will be in hot demand, particularly those operating with highly skilled labour which will remain in short supply, for example in electrical engineering.

“Subcontractors will continue to hold the balance of power for at least the next year, and Tier 1’s will remain under pressure from clients increasingly sceptical about their added value.

“Conditions remain ripe for consolidation in the industry, with overseas buyers continuing to take a very close interest in the UK market.

“I believe construction demand will remain high for many years. The Government is committed to infrastructure programmes which will take decades to deliver.

“Still-improving economic sentiment will continue to drive commercial demand.

“Housing pressure remains acute and eventually some major supply-side intervention by Government seems inevitable.

“2016 is therefore the year for businesses in the construction sector to invest and build the capacity and capability to take advantage of this strong domestic market.”

Latest news

Barratt & Segro set for £2.5bn Meridian Water site

Joint venture understood to have won race for 8,000 home Enfield scheme
3 hours ago

Kier starts £19m home for last Concorde

New Filton Airfield museum will tell the story of Bristol’s aerospace industry from 1910
2 hours ago

Plans unveiled for London Elephant & Castle town centre

Ambitious high-rise scheme to replace famous pink shopping centre and London College of Communication
4 hours ago

Henry Boot dismisses talk of construction slowdown

More doubts cast over Government stats as business booming at construction division
3 hours ago

Balfour Beatty bags £130m M20 lorry park job

3,600-space lorry park to ease congestion from queueing lorries when cross-Channel transport is disrupted.
3 hours ago

BAM wins £41m Birmingham City Uni project

Work starts next month on the City South Campus in Edgbaston
3 hours ago

Portakabin bags £8.2m worth of school rebuild jobs

Off-site techniques cut school build times in half
3 hours ago

BAM Mott jv wins Devon and Yorkshire flood schemes

Work will start on the £32m next phase of the Exeter flood relief scheme in June
4 hours ago

WSP swoops to buy rival consultant Sweett

£24m deal sees WSP continue on the acquisition trail
1 day ago

Swansea Tidal Lagoon developer dumps Chinese contractor

Swansea Tidal Lagoon developer to retender £300m sea wall contract
2 days ago

Cleveland Bridge UK returns to profit after four years of losses

New management team turns steelwork contractor around with £2.5m profit
1 day ago

Leaking mobile crane closes London Blackwall Tunnel

Traffic chaos across South London as contractors battle to resurface damaged road
2 days ago

GPE gears up for two more London starts despite Brexit fear

Gt Portland Estates warns over ‘unhelpful’ EU stalemate
1 day ago

Sixteen firms win national £1.5bn RE:FIT framework

National retrofitting scheme to lower public sector energy bills
1 day ago

J Murphy joins trade body Build UK

Abestos removal firms also sign up to newly-former contractors' association
1 day ago

Forrest to build £12.6m Manchester resi scheme

Construction to start this month on twelve-storey scheme
1 day ago

Didcot recovery operation hit by further delays

Bodies of disaster victims still not returned to their families after three months
1 day ago

Brexit fears send site wages soaring to £1,000 a week

Bricklayers now earning £25 an hour as skills shortages set to intensify if UK votes to leave Europe
2 days ago

Small companies being left behind by “BIM divide”

Smaller firms missing out on the benefits of computer modelling warns Morgan Sindall
2 days ago

Local contractors urged to chase £6bn schools deal

SME leaders encourage member firms to go for places on massive education framework
2 days ago

Renew hits acquisition trail as profits soar

Engineering services specialist delivers record results in first six months
2 days ago

Green light for £2.6bn Scottish windfarm

Construction to start this year on huge infrastructure investment
3 days ago

Skanska jv wins £100m National Grid Humber tunnel

Gas pipeline will be the longest in a tunnel, inserted in a single string in the world
3 days ago

New finance director for Clugston

Ian Pattison joins from Aim-listed office services group Restore
2 days ago

Gilbert-Ash seals £21m Oldham theatre revamp

Work to start on Oldham Coliseum and library revamp
2 days ago

Demolition starts for £400m Marble Arch Place

Brookfield Multiplex will replace 1960s Hyde Park tower with mixed-use development
3 days ago

Manchester Uni suspends £170m student halls as bids soar

University goes back to the drawing board as builders fail to meet target price
3 days ago

Wates lands £30m Farnborough exhibition centre job

Construction to start in September to expand home of famous airshow
3 days ago

Famous film labs to be turned into £120m resi scheme

Weston Homes to start revamp of Denham site where Star Wars and James Bond were created
3 days ago

Farrans bags £33m London special needs school

Oaklands 224-pupil special needs school will be built in Hounslow
3 days ago

Contractor services