UK Contractors Group Members warn of continuing challenges for the UK Construction Sector
David Lawther, the CEO of ISG, John Morgan, the Chief Executive of Morgan Sindall and Wates Construction boss Paul Dreschler have all been quoted in Construction News in the last month commenting on the challenges that face their own companies and the UK Construction Sector for the remainder of 2013 and into 2014.
In comments linked with the release of results for ISG following results for the 6 months to 31st December 2012 which showed a group operating margin of 1%, David Lawther says “we’re clearly in a market where capacity is being taken out of the marketplace and that process will go on through the next 12 months”.
Echoing the same opinion, John Morgan is quoted as saying “I think 2013 is going to be pretty hard and I don’t think 2014 is going to be much better.” “I think the industry is still too big for the market.”
Wates Paul Dreschler was even more blunt about the sustainability of the sector “Some of the pricing is ridiculous and unsustainable” and the impact this will have on some of the businesses in construction “some construction companies are sailing very close to the wind” when it comes to their cash balances. “I would never predict that somebody would go out of business because so many people in this business seem to defy gravity” “If there’s such a possibility, a number of people are a darn sight closer now than they were 12 months ago”.
If the leaders of some of the UK’s major contracting companies are being open about the risks that the sector is facing, it underlines the need for all companies in the sector to have a clear and realistic understanding of the risks and to have a clear strategy for managing trade credit risk – whether or not credit insurance is used as a means of managing this risk.