As we compare the market share between the 20 biggest contractors pre and post recession, the next question is what must firms do to ensure they’re on top in another six years?
Things look very different now to this time six years ago. Back in the summer of 2008 the City seemed an unstoppable force, and - unlike this weekend - that year’s major football tournament, the European Championships, was just kicking off with the England team embarrassingly absent.
For the industry’s biggest contractors, too, the last six years have seen some seismic changes. Our analysis this week (pages 22-24), crunching the numbers on the 2008 top 20 firms compared with the list today, has thrown up some compelling shifts. The 20 biggest contractors, despite the margin erosion you would expect, look to have actually increased their market share over smaller rivals. Meanwhile, there are four new entrants to the list, and one of the industry’s biggest names - Sir Robert McAlpine - has seen its group turnover halve in size.
One of the most interesting points raised is the light the analysis casts on which strategies have enabled firms to do well. Those companies that have performed best have been either those which have clearly diversified, or, conversely, those which have honed their offering to become particularly specialist.
Any analysis of this sort is obviously accompanied by a slight time lag, as the companies’ last reported results mostly reflect their 2013 year end. This begs the obvious question - what are the strategies being put in place now to enable firms to come out on top of the market in another six years?
There is no doubt that the contracting sector is still in the midst of a huge period of change. The recent developments at Balfour Beatty are the highest profile example of a contractor undergoing a major strategic shift, and - given that this shift has been forced upon it by a combination of financial and wider market pressures - it is not going to be the last firm which needs to re-evalute its position.
Those companies that have performed best have been either those which have clearly diversified, or, conversely, those which have honed their offering to become particularly specialist.
As the market continues to return to strength, firms will inevitably make different calls on their priorities. Some areas look reasonably sure bets - a strong presence in housing or support services, for example. But there are also key decisions to be made by businesses on other issues which are more fundamental to their business structures, and will have a major bearing on their performance over the medium term.
One is the extent to which firms will gamble on investment in offsite manufacture, which entails heavy costs but if demand is there in scale, can offer equally hefty time and financial savings.
Another is how advantageous it will be to become a “one stop shop”, not so much in terms of combining consultancy and contracting (a strategy not met with the favour of clients to the extent hoped for by Balfour with its Parsons Brinckerhoff acquisition), but in terms of gaining efficiencies by offering services currently provided by external sub contractors.
Only time will show which calls will pay off. But two things are certain for contracting. One, that the list of top 20 firms in another six years stands to look very different to that today, and two, that in a market still in such a state of flux, doing nothing is not an option.
Sarah Richardson, editor