This month is seen Construction news publishes its annual CN100 table of the UK’s leading contractors. Headline figures set a bullish tone: companies on this year’s list saw their combined revenues hit an all-time high of almost £71bn, while pre-tax profits and margins returned to general to where they were before the Covid attack.
Additionally, our analysis of this year’s data shows that 14 companies returned to profitability and the majority of the CN100, 55 companies, saw their net cash positions improve.
All this suggests that the big contractors were able to recover from the triple whammy of the pandemic, Brexit and the effects of the full-scale Russian invasion of Ukraine.
So is it time to pop the champagne corks and celebrate? Or are the figures for the last 12 months just a cruel mirage – a bounce off the dead cat when post-lockdown cumulative demand was released?
After all, three 2022 CN100 companies (Buckingham, Henry and Tolent) collapsed this year, and as our monthly executive summary shows, business failures in the construction sector remain at a high level, with a new record total in August.
Even if rising revenue for prime contractors translates into more work for supply chain companies, the fact is that an all-too-familiar cocktail of material and labor price issues, along with macroeconomic inflationary pressures which are just beginning to ease, he continues. problems in the construction sector.
The last few weeks have seen gloomy forecasts from the Construction Products Association and PwC. The former predicts a 7% contraction in construction activity this year, while the latter predicts an 8% contraction, which will put the sector back into crisis mode.
Survival strategies could include diversification to capture a share of the retrofit market, for example. Others might focus on keeping revenue out the door. But the savviest companies will focus on profits and cash. With margins so tight in the construction industry, there is little wiggle room, so a higher cash reserve could help tide over tough times.
As Bill Murray’s character says in the classic film groundhog day: “When Chekhov saw the long winter, he saw a bleak, dark, hopeless winter. But we know that winter is just another step in the cycle of life.”
In other words, the wheel will turn, but whether they’re large prime contractors or specialist SMEs, construction companies will be hoping for something to warm the soul in the coming months.
