UK construction getting buoyant once again

After a prolonged period of economic uncertainty, the majority of construction companies in the UK and worldwide are confident about the growth prospects of their industry, with a large number of firms reporting increased order books, pipeline and profit margins and many planning to expand either into new regions or new sectors such as power and energy, a survey by KPMG has found.

KPMG’s Global Construction Survey 2013: Ready for the Next Big Wave reveals that almost three quarters of companies in the UK (73%) are “positive” or “very positive” when asked to describe their medium-term outlook (next two to five years). Companies in the Americas and AsiaPacific are even more optimistic, (with 91% and 65% respectively describing the medium-term outlook as “positive” or “very positive”).

Almost two-thirds of UK companies (57%) say they expect their company to grow between 1-25% this year (based on 2012 revenue). Again, respondents in the Americas are the most confident when it comes to growth forecasts; 80% say they expect their company to grow between 1-25% this year.

Richard Threlfall, UK Head of Infrastructure, Building and Construction at KPMG said: “There has been a growing sense in the last couple of months that the worst is over and the results of our survey provide further evidence that construction activity is finally picking up.

“Construction companies now need to invest in growth. What is holding back the industry now is not lack of demand, but the ability of businesses to resource for it and recruit sufficient experienced staff.

“The next round in this highly competitive market will be won by those who have the resources to compete. Companies need to act now, because the industry’s resurgence is already underway.”

According to the survey, the majority of companies worldwide report increased order books, pipeline and profit margins. In the UK 50% of respondents said their order books at the end of 2012 had increased by at least 5% (compared to 61% of respondents in America). More than two-thirds ( 67%) of UK companies foresee an increase in pipeline by the end of this year and almost a fifth of companies (20%) said compared with the previous year their profit margins had increased by the end of 2012.

More than half of UK construction companies (53%) think that government infrastructure plans, urbanisation and economic growth will be the leading drivers for growth in the sector. Companies in the Americas see government infrastructure plans (58%) as the key market driver, followed by privatisation efforts via public-private partnerships (48%) and access to new energy resources, such as natural gas or renewables (42%). In the burgeoning economies of the AsiaPacific Region, government infrastructure plans (67%), population growth (49%) and urbanisation (475) were seen as the second and third most important drivers, respectively.

Of all the new sectors being considered, power and energy top the list, with all (100%) of UK respondents considering expansion into that industry. The other top sector is rail (83%), followed by industrial (33%) and water-related (17%). Many UK firms are targeting international expansion, with 60 percent saying that the US and Canada is a top priority in terms of entering new geographies.

Alistair Buchanan, Chairman KPMG Power & Utilities said: “Transmission network and gas distribution companies are expected to attract inward investment totalling £40billion. The sector has already signalled around 5000 jobs to be created, and the new GB pricing model awards, for the first time in 20 years, monies for research and development called innovation funding. This is just the start; with another £30billion on electricity distribution in 2015, the roll out of round 2 offshore just starting, and the massive £110billion needed in generation.”

Have your say on this story using the comment section below