With our economy now back in recession and the industry finally in the midst of the tough time it’s been predicting since 2010, July’s Government Construction Summit could not come at a better time. The recent economic data for Q1 was grim, with GDP falling by 0.2% and construction sector output down by 3%. But the numbers just reflected what we are already seeing, with public sector clients going through severe budget cuts and private sector confidence fragile outside of London.
Projects commissioned before the government’s deficit reduction plans have been completed and falling work volumes combined and acute margin pressures have plunged construction into the hardest downturn I’ve seen in my career.
All of us are adjusting business models as we face a tough trading environment with several challenges: the risk of commodity and labour rate inflation, increased supply chain failure, a general client drift back to lowest tender price selection and a growing acceptance by many contractors of higher risk transfer in the attempt to preserve their volumes.
One of the biggest issues facing us is that work procured now will define performance over the next two to three years, so achieving the right quality without being sucked into “lowest cost” tendering is occupying the agenda in every boardroom. For our collective health, we must be disciplined to resist these short-termist practices which will undermine our ability to rebound and thrive.
This summit is essential to recognise our industry’s role and importance to UK plc, along with demonstrating to government how we can meet its “more for less” agenda
Yet 2012 will also be a triumph for our industry with the Olympic Games showcasing to the world just what we can do. Government ministers attending the Olympics should pause to reflect that it was our sector that delivered these world-class facilities, on time and on budget, and remember that when it comes to construction and engineering skills, we really are in the Champions League.
That’s why this summit is essential to recognise our industry’s role and importance to UK plc, along with demonstrating to government how we can meet its “more for less” agenda and be a catalyst for wider economic growth. This is borne out by research by the UK Contractors Group that shows every £1 spent on construction work generates economic value
It’s important we emphasise at the summit just what a forward thinking, high-tech industry we are, with skills admired across the world. New innovations in areas like BIM, the green economy and use of standardisation show an industry evolving to reduce duplication and cost and deliver its product more efficiently. Likewise it will be good to see how our industry is responding and engaging with new opportunities presented through the Localism agenda.
Necessity breeds new ideas and the market is reacting and innovating, bringing forward new ways of working and new product lines. Companies that innovate with new ideas that help clients achieve their “more for less” or asset rationalisation challenges will find they have plenty of partners willing to do business. Just look at some of the new “bundled” service contracts being let by clients.
The Government Construction Summit provides a superb opportunity for government and construction sector to re-engage, discuss challenges, explore new ways of working and come together to map out the way forward: the government is evolving as a client and the private sector needs to evolve as a supplier. Willmott Dixon welcomes the opportunity to be part of this evolution.
John Frankiewicz is CEO of Willmott Dixon Capital Works
Supply chain/SMEs breakout session
John Frankiewicz will be speaking about how we can work together for a more stable supply chain and attract new entrants with specialised skills to the sector at 14:55 as part of the Supply chain/SMEs breakout session. Reserve your place on this session by registering online.