Building Contracting Sep 2001
Executive Summary
Building contracting is part of the wider construction market. It can involve several processes, including design, project management, site preparation, the procurement of materials, the erection of structures and the final fitting out of the building. To an increasing degree, it also involves raising finance for the project, as well as overseeing the long-term management of the building, and many of the larger construction companies now regard themselves as operating within the services sector.
In 2000, construction output was valued at £69.53bn, with new work representing 54% of this total, and repair, maintenance and improvement (RMI) accounting for the remaining 46%. Within these sectors, construction work is segmented into private commercial, private housing, public housing, infrastructure, other public non-housing and private industrial subsectors. Private commercial is the largest sector within new work, while in the RMI sector, housing accounts for the largest share of output.
UK construction companies undertook around £3.4bn of overseas work in 1999. The UK is regarded as one of the five leading countries involved in international contracting.
165,561 firms were employed in private contracting in 1999. The majority of firms are small; 95.7% of the total employed fewer than 14 people. General builders were estimated to account for a quarter of all firms in 2000. The industry employs around 958,800 people, and the number of employees has been rising steadily in recent years.
The average company turnover among major building and civil engineering contractors is around £180.8m, with profits averaging £7.6m. However, these figures are vastly exceeded by major international companies such as Balfour Beatty PLC and Amec PLC. Nevertheless, in an international context, even these are dwarfed by Japan's Shimizu and Kajima Corporations, France's Bouygues, and Bechtel of the US.
A growing trend among larger contracting companies in the UK has been to increase the value of business within the services sector, through investment in property, private finance initiatives (PFIs) and facilities management. Key issues facing the building contracting industry include the implementation of best-practice schemes, a subsequent increase in partnering away from the more adversarial, competitive climate and a reported, industry-wide shortage of skilled labour.
Key Note forecasts ongoing consolidation at the top end of the market, with the emergence of some truly global players, while the other end of the market will become more focused on niche-orientated, specialist players. This leaves room for medium-sized contractors to pick up the more traditional, core construction tasks. The focus on added-value work and global synergy is likely to continue, with increased use of technology. The construction market itself is forecast to increase by 10.4% between 2001 and 2005, with the growth rate peaking in 2002. RMI is forecast to show slightly higher growth than new build.
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