{"id":64141,"date":"2019-10-03T10:30:27","date_gmt":"2019-10-03T09:30:27","guid":{"rendered":"https:\/\/www.pbctoday.co.uk\/news\/?p=64141"},"modified":"2019-10-03T10:30:27","modified_gmt":"2019-10-03T09:30:27","slug":"uk-construction-industry-sales","status":"publish","type":"post","link":"https:\/\/www.pbctoday.co.uk\/news\/planning-construction-news\/uk-construction-industry-sales\/64141\/","title":{"rendered":"UK construction industry suffers further sales decline"},"content":{"rendered":"

The UK construction industry has experienced a further slowdown in sales, turnover and profits pointing to a sustained downward trend, according to the latest UK Construction Sector Report from MHA<\/a><\/h2>\n

Turnover in the last year for the UK construction industry grew 5.3% but was in striking contrast to the 14.1% increase recorded over the past two years, revealing a slowdown in the industry\u2019s growth.<\/p>\n

Larger construction businesses, those with a turnover of \u00a3200m and over, continue to experience a decline in turnover levels with the average dropping by 13.8% this year.<\/p>\n

In the face of this decrease, larger firms have reduced their workforce numbers<\/a> from last year, with the average number of employees reducing from 878 to 777. Elsewhere, staffing levels remain static.<\/p>\n

The extension of the IR35 legislation \u2018off-payroll\u2019 rules for the private sector, which comes into force in April 2020, is likely to see employment numbers rise and with it, the potential impact on prices or further squeeze on margins. However, there appears no apparent material increase in employment numbers at this stage.<\/p>\n

While the average gross profit margins for the UK construction industry are in double figures across the board, it is the smaller companies (under \u00a325m turnover) that have seen the highest margins of between 20-25%. For mid-tier firms (\u00a3100-150m) the margins drop to just over 14% (14.4%) and larger firms have seen a decline to 11.2%<\/p>\n

Overall, average margins are declining year on year and for the larger firms the fall in turnover and the desire to maintain workforce continuity, as well as general competitive pressures, are behind the squeeze. In a post-Carillion world<\/a>, the report seems to indicate these firms are looking to improve profitability rather than chase turnover.<\/p>\n

A slowdown in the UK construction industry is further emphasised by the biggest fall in new work for a decade according to the IHS Markit\/Cips UK construction PMI survey<\/a>. This together with a lack of new infrastructure projects and major developments and a depressed demand created by Brexit uncertainty, are also contributing to the slowdown.<\/p>\n

Whilst there is a general upward trend in dividends, the levels have fluctuated across the different sizes of firms. The smaller firms have either remained static or seen a decline. Most notably, those in the \u00a35-10m turnover bracket saw a significant decrease in payouts of 85.6%, this is in contrast to a leap of nearly 250% the previous year. For the largest businesses there was a 60% decrease in dividends from last year compared to a 17.1% rise over a three-year period.<\/p>\n

The overall construction industry\u2019s profit before tax performance showed a decline in 2019 with only small firms experiencing increases, although these were lower than two years ago. For the larger companies, who saw the biggest declines \u2013 the largest drop being from \u00a346m last year to \u00a326.3m in the current year \u2013 lower profit before tax is the inevitable result of reduced turnover and margins.<\/p>\n

Robert Dowling, head of construction and real estate at MHA, commented: \u201cIt remains a challenging time for the UK\u2019s construction industry. Nationally, firms have managed to maintain similar levels of profitability with slightly lower gross profit margins than last year. But the indications of a downward trend are there.<\/p>\n

\u201cDeclining workloads and the potential impact these may have on profits could mean tougher times ahead for some firms. At such times it is important that firms adopt and maintain disciplined and strong management whether that is remaining focused on your core specialisms or strengthening the balance sheet by retaining higher levels of profit.<\/p>\n

\u201cFirms should look at technology investment and the implementation of strategies to reduce tiers of management whilst retaining key personnel and the adoption of robust project risk management; all of which can enable firms to ride the downturn and even prosper.\u201d<\/p>\n

Dowling added: \u201cIt is impossible to talk about the future prospects of the industry without mentioning Brexit. Beyond the impact of the current uncertainty, the industry could even stand to gain from a post-Brexit boost and any UK government commitments and plans for infrastructure investment will be warmly welcomed.\u201d<\/p>\n

\n<\/div>","protected":false},"excerpt":{"rendered":"

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