KPMG: Construction sector confidence is building

Simon Donohue

Confidence is returning to the construction industry with the North West sharing in a growing sense of optimism, according to KPMG.

KPMG's Global Construction Survey 2013: Ready for the Next Big Wave reveals that almost three quarters of companies in the UK (73%) are 'positive' or 'very positive' when asked to describe their medium-term outlook for the next two to five years. Additionally, almost two-thirds (57%) say they expect their company to grow between one and 25 percent this year based on 2012 revenue.

Chris Fry, Head of Building and Construction for KPMG in the North West, said: "There has been a growing sense in the last couple of months that the worst is over, and the results of our survey provide further evidence that construction activity is finally picking up.

"And the good news is that this is not just on a national level. We are undoubtedly seeing an uptick in construction activity across the North West too.

"Only this weekend we saw confirmation that work will start next year on Manchester Airports Group's £800m Airport City scheme after a joint venture deal was agreed with the Beijing Construction Engineering Group. Couple this with other big ticket projects such as the Liverpool and Wirral Waters schemes, and the Second City Crossing in Manchester, and it's clear that the region is playing a big part in helping the construction industry in its recovery.

"Construction companies now need to invest in growth. What is holding back the industry now is not lack of demand, but the ability of businesses to resource it and recruit sufficient experienced staff.

"The next round in this highly competitive market will be won by those who have the resources to compete. Companies need to act now, because the industry's resurgence is already underway."

According to the survey, the majority of companies reported increased order books, pipeline and profit margins. Half of all respondents in the UK said their order books at the end of 2012 had increased by at least 5%, while 67% foresee an increase in pipeline by the end of this year. A fifth of companies said that when compared with the previous year, their profit margins had increased.

More than half of UK construction companies (53%) think that government infrastructure plans, urbanisation and economic growth will be the leading drivers for growth in the sector.

Of all the new sectors being considered, power and energy top the list, with all UK respondents considering expansion into that industry. The other top sector is rail (83%), followed by industrial (33%) and water-related (17%).

Many firms are also targeting international expansion, with 60% saying that the US and Canada is a top priority in terms of entering new geographies.

Chris Fry added: "I am not at all surprised to see that construction companies are now setting their sights on the power and energy sector, given the pressure from Government to achieve renewable energy targets along with increasing concerns over energy security in the UK.

"Here in the North West we have a number of such schemes already in the pipeline, including the Walney Wind Farm extension in Cumbria, the Barton Biomass project in Trafford and the Thornton Cleveleys CCGT plant in Lancashire."

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