Deloitte warns of effect on mid-tier and regional contractors

Chief financial officers in the UK are becoming less willing to commit resources to capital expenditure according to a survey by consultants Deloitte.

It said just 14% of the top officers identified raising capital expenditure as a priority in its first-quarter 2012 survey, a drop from 16% in the last quarter of 2011 and down from 21% in the first quarter of 2011.

Deloitte said that while chief financial officers (CFOs) were more optimistic overall, they were still pursuing defensive strategies.

Construction and infrastructure partner Paul Trickett said the capital-expenditure figures provided little cheer for those hoping private sector investment would drive growth in a struggling construction market.

“Securing a sustainable forward order book with decent profit margins is key to supporting contractors in this fiercely competitive market and, with UK business looking less inclined to invest, this just got harder,” he said.

“For mid-tier and regional contractors this will be worrying news. The top tier ‘super-contractors’ in the UK market have the scale and balance sheets to compete and diversify throughout the supply chain, capture profitable niches and seek acquisitions.

“However, it is more difficult for the smaller players to re-focus resources into alternative sectors that will yield profitable future work.

“They need to look urgently at how they diversify their portfolio of work and ensure they have the financial controls and management procedures in place to remain fighting fit.”

To read the full report, click here.