Industry profitability at 15-year low despite growth in activity
According to industry analyst, Glenigan, construction margins have ‘plummeted’ to their lowest level for 15 years.
The 2014 UK Construction Key Performance Indicators Annual Report found industry profitability has dropped to 2.1% – the lowest level since the Construction KPIs were first launched in 1999.
It also marks the fourth consecutive decline in industry profitability which is down from 2.7% recorded in the previous report in 2012 as the market continues to suffer the after effects of the economic downturn.
Produced in partnership with the Construction Industry Training Board (CITB) and endorsed by the Department of Business, Innovation and Skills (BIS) and Constructing Excellence, the 2014 Construction KPIs suggest ‘challenging’ economic conditions have undermined the industry’s efforts to deliver improved services to clients.
Despite improved predictability of project delivery, both to cost and budget, client satisfaction levels have largely decreased, with clients’ perception of value for money slipping to its lowest level since 2008. Client satisfaction for housing projects, in particular, showed a marked deterioration, with product and service scoring 74% and 62% respectively, the lowest level since 2003.
However, elsewhere in the report there are credible signs of improvement. The latest results show an overall increase in the predictability of construction projects, pointing to a more positive situation with regards to the pipeline of work. Cost predictability either improved or was maintained from 2012, while time predictability increased across all three measures. Project costs were on budget or better for 69% of projects; up from 61% recorded in 2012 and a new survey high.
Official Health and Safety Executive (HSE) statistics have recorded a sustained improvement in the industry’s Accident Incident Rate (AIR) over the last decade. The rate fell to 420 reportable accidents per 100,000 employees in 2012/13, a 21% reduction over the two years since the last KPI survey.
“The Construction KPIs reveal how companies have responded to a protracted industry recession that has re-shaped the sector over the last five years,” explained Allan Wilén, Economics Director, Glenigan. “They also highlight the challenges that firms now face if they are to seize opportunities as industry workload strengthens over the next two years.”
Caption Glenigan’s 2014 Construction KPIs suggest ‘challenging’ economic conditions have undermined the industry’s efforts to deliver improved services to clients.