Contractors paint gloomy picture for construction industry

Ian Tyler, chief exectutive, Balfour Beatty - the top contractor in the construction 100

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Chief executives at the UK's top 100 contractors have a gloomy view of the prospects for the construction industry in 2009.

Chief executives at the UK's top 100 contractors have a gloomy view of the prospects for the construction industry in 2009.

Of the top senior executives polled by Construction News for this year's Construction Top 100, not one felt that the economy was set for growth next year.

Having experienced a decade of consistent rises, the downbeat outlook follows a year of relentless bad economic news.

Those surveyed believe the prospects for construction companies are dire - 90 per cent predict they will perform worse or significantly worse in 2009.

After a particularly tough year for private house builders, it is no great shock that industry chiefs in this sector are predicting further turbulence for the nation's home builders next year.

But leaders from all other sectors in the industry say, at best, they are predicting a static performance next year.

At the root of the pessimism is the belief the UK economy will experience a downturn in 2009.

Just three per cent of those surveyed believe the economy will perform the same, with the remaining 97 per cent predicting it will perform worse or much worse.

Strong expectations for the public housing sector have gone into reverse - more top 100 chief executives predict a downturn in this sector than a revival.

Sixty-six per cent said they believe the Government is now less likely to meet its spending commitments compared with 44 per cent surveyed last year.

One senior executive described a worst-case scenario associated with falling public spending. He said: "If the credit crunch challenges within the banking sector drive a full-blown recession in the UK, to the extent that the public sector and regulated industries are forced to scale back their investment plan, that would change everything."

Another executive said the blame for the conditions lies with uncertain workloads combined with rising input costs. He said: "Raw material costs have previously had little impact.

"Now the markets are volatile, the global impact and influence is huge. Unless costs stabilise, the industry may grind to a halt despite there being projects ready to construct as they will not be financially viable."

BIG PLAYERS STILL GROWING

The construction industry's biggest players have continued to grow despite challenging economic conditions.

The Construction Top 100 reveals a nine per cent increase in pre-tax profit from £1.78 billion to £1.95 billion for the Top 100 industry companies as a whole.

The increase comes on the back of a £300 million rise in turnover for the Top 100 to £53.3 billion.

But the increases are significantly down on those achieved by last year's Top 100, when turnover was up £8.5 billion year on year and pre-tax profit up £365 million

Balfour Beatty is once again the top contractor in the industry, recording a 44 per cent increase in turnover from £4.5 billion to £6.5 billion and a 32.3 per cent increase in pre-tax profit from £136 million to £201 million.

WHERE INFLUENCE LIES

Trade associations and clients have the most influence over the construction industry, according to many senior contractors.

This year's Construction Top 100 features a list of the people who matter for some of the industry's key sectors and there is a strong representation from trade bodies and those who control the flow of work – the clients.

Following research and interviews with senior figures in each sector, the people chosen are not necessarily the biggest or most powerful players, but those who the rest of the sector feel are the most influential.

For more on the Construction Top 100's listing, profiles and analysis click here