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Viewing report
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Building Contracting Market Report 2005
Key Note Publications Ltd, Jan 2005
Building contracting is defined in this report as construction processes that include the erection of new, or improvement and repair of existing, residential and non-residential buildings. It can incorporate a variety of activities, such as design and planning, project management, site preparation, procurement of materials and erection of structures through to the final fitting out of the building. Some of the larger contractors now classify themselves as operating in the services sector, since they also take responsibility for the long-term management of the building, often raising the finance.
Building contracting operates within the context of the construction market as a whole. Output of the construction industry in Great Britain is estimated to have reached £101.98bn in 2004 at current prices (£80.38bn at constant prices, according to forecasts from the Construction Products Association [CPA], reflecting very buoyant conditions and strong growth. This market is broken down into new work, and repair, maintenance and improvement (RMI). Further segmentation of the construction market shows that within new work, private commercial and private housing are the largest areas. In the RMI sector, however, private housing is by far the most substantial single area.
Analysis of the size of private building contractors shows that smaller contractors are in the majority. There have been drives to improve the image of the industry in the general builder sector and, at the top end, a focus on benchmarking through key performance indicators (KPIs). A number of government-led reviews have spurred on a desire to improve quality and efficiency and to stimulate a client focus, while engendering a spirit of partnering and collaboration. One ongoing problem within the industry, however, remains the shortage of skilled labour, which if not resolved satisfactorily will hinder future growth.
The British contracting market is subject to global economic conditions. For example, strong demand within the Chinese construction market has created an alternative outlet for material suppliers, such as the steel industry, which can impact on the cost of steel and therefore buildings in the UK. In a European context, UK contractors are dwarfed by French, Swedish and German contractors, although Amec was identified as the seventh-largest contractor in Europe in 2003 in terms of turnover. Many of these contractors have UK divisions and compete internationally, as do US contractors such as Bechtel and Fluor. Similarly, there are opportunities for British contractors to tender for overseas contracts, including European infrastructure projects and, in the case of Amec, gaining reconstruction work in Iraq.
Using the CPA forecasts to 2007, it is predicted that output of the UK construction market will grow by 2009 at constant prices. The key drivers of growth will be public sector/private finance initiative (PFI) education and health projects, as well as social housing. Throughout this period, environmental legislation will impact on material usage and waste reduction issues within the industry, with a view to achieving more sustainable construction.
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