PROFITABILITY among the UK’s construction firms has fallen to its lowest levels since 2000 as contractors struggle with pricing, according to a new industry report.
The research, by Constructing Excellence and research company Glenigan, for the department for Business Innovation and Skills and the Office of National Statistics, shows that profits fell from 7.7% in 2009 to 5% last year.
Despite squeezing profit margins, the report, which is based on thousands of construction projects that were completed in 2010, does show that firms have managed to increase their ability to predict the cost of construction in 2010, and have recorded the best performance in a decade.
A dwindling pool of contracts has also seen more importance placed on client retention and repeat business, with the report showing that 80% of companies achieved overall client satisfaction.
The report also highlights the increased importance of sustainable building methods, with projects seeing substantial improvements in water usage, vehicle movements and construction materials.
Jeff Alexander, director of Newcastle developer Surgo Construction, confirmed that the report was an accurate measure of how the market was performing.
Surgo, which employs around 120 staff, has managed to build up a strong pipeline of business this year, despite the gloomy picture, with contract wins including work to Adan House, home to St Andrew’s Medical Practice in Spennymoor, County Durham, the £4.9m construction of St Joseph’s Primary School for Sunderland City Council, and the refurbishment of South Tyneside College.
The firm has also just been handed a £3m contract to build an extension to Durham University’s health research centre at the Wolfson Research Institute.
Alexander said: “I think one of the important things to come out of this report is that construction firms are doing everything they can to ensure that contracts are being finished on time and to the highest level.
“We have found this element of our work to be extremely important as a way of winning follow-up contracts from our clients. For example, we have completed work before for Durham University and believe this helped us to secure the new contract at the Wolfson Research Institute.
“It is also pleasing that firms are responding to growing requirements among customers over sustainable and environmental building.”
The new report comes just days after Newcastle builder Whelan Construction was put into administration following a significant drop in work, with the resulting loss of 49 of its 53 staff.
The firm had been one of the North East’s more successful independent builders and, four years ago, had a workforce of more than 100, a turnover of more than £30m and big expansion plans.