Productivity is UK construction market’s Achilles heel
Confidence among UK contractors has reached historic lows as the number of new orders begins to reflect levels normally seen only in ‘severe recessions’.
Sentiment in the industry saw its third successive quarterly fall in Q2 2019, according to our most recent UK Market Intelligence Report.
Our report points to falling rates of new orders, highlighted by the Office of National Statistics (ONS), as key drivers behind the crisis in confidence. Figures for the first quarter of 2019 show a decline of 12.8 percent on the same period in the previous year, on an annualised basis.
At the same time, our analysis of material cost inflation at 3.4 percent highlights continued pressure on contractors’ margins.
Against the backdrop of higher costs and falling order numbers, contractors regard the tendering environment as weak. 54.8 percent of respondents surveyed described conditions as lukewarm, while only 10.8 percent of respondents expected the market to get warmer over the coming 12 months.
Respondents to our survey identified all-too-familiar bugbears – political instability around Brexit, a lack of confidence in the market to invest in new projects and skilled labour shortages – as being the greatest challenges facing the sector.
However, analysis shows that poor productivity is being largely ignored, with it ranking third from bottom on the list of key challenges.
Productivity in construction, when measured by output per job, has only increased by 14.8 percent in almost three decades. In that same period other industrial sectors have outpaced productivity gains in the construction industry.
Paul Connolly, UK Managing Director of cost management said:
“Construction’s dysfunctional relationship with productivity is being largely ignored. This is perhaps understandable as contractors contend with more pressing priorities. But if this is a burning platform moment for the industry, the productivity crisis is an engine room fire.
No one innovation will solve the construction industry’s productivity problems. When used intensively and intelligently though, modern methods such as off-site construction can deliver greater efficiency, quality, and confidence.
“Productivity is the Achilles heel of the construction industry. Left unchecked this weak spot will only get larger, severely limiting the sector’s future growth potential. This will leave a damaging legacy that will stifle progress long after the current cyclical issues fade.”
Read the UK market intelligence report to find out more about these challenges and see the full analysis and insight from the survey.