The writer of No leftovers (18 July, page 30) appears to be confused in comparing the margins in contracting with the margins obtained in the manufacturing industry.
In the latter, substantial capital investment is required before any return can be achieved. In contracting very little is needed, and this is reflected in the lower margin. Thirty-seven years ago, I founded my business with £1000 in the bank and have never had an overdraft since. The true measure of success is return on capital invested and it is this that should be used when comparing margins. Our projected profit before tax this year is about £4m – my calculation is off the scale when assessing return on my capital.
Your writer is not alone in protesting that 2-2.5% margins do not allow proper investment in training and innovation. I have heard many senior leaders in contracting bemoaning the same fact. My response is to use the current in-word: Horlicks. Investment in training staff is the only way to improve profits and stay in business.
Geoffrey Osborne, president, Geoffrey Osborne, via email.