Branching out

Perhaps spreading the risk is a good idea, as those who consolidate their business in one sector may be trampled on by larger players when the going gets tough.

Current forecasts suggest that the unprecedented run of industry growth that the majority of those in construction have enjoyed over the past 10 years doesn’t yet show any signs of abating – yet.

However, we may well talk ourselves into a recession in the coming months as levels of hysteria rise and the Bank of England continues to cut interest rates to calm the baying masses.

Public sector expenditure, which is a major driver of economic growth, is set to become an even more important positive influence as the private housing market falls into further decline.

The retail sector is expected to continue to increase its programme of new-builds, refurbishments and expansions as competition intensifies, driven by the retailers’ shared desire to attract more customers.

There should be a constant and heavy flow of fit-outs and refurbishments, unless the retail market is hit by higher interest rates. However, there is no certainty, so self-confessed retail specialists beware, and be prepared to register your expertise in other sectors.

Although the commercial property market has recently been threatened, build and refurbishment output is still due to increase, with growth split across London and the regions.

Again, the final outcome here is precarious, resting on interest rates and shadowed by potential changes in the overall economy.

It is the public sector that has the greatest potential to keep the wolf from the door on behalf of its suppliers in the coming years, and contractors that are building relationships within this sector are most likely to emerge as the winners.

The public sector is currently the construction industry’s biggest spender.

Local authorities and public bodies are rolling up maintenance and small-works packages into high-value frameworks, which are attractive to large national contractors and facilities management companies alike.

Public sector procurement processes such as the Private Finance Initiative (PFI), Building Schools for the Future (BSF), and frameworks with selection based on best value means that larger contractors, with more sophisticated business systems, are most likely to be successful, so the smaller, regional contractors need to be on their toes.

Public clients like to deal with locally based suppliers who contribute towards their authorities in terms of employment, local economy, social responsibility and sustainability.

National contractors, looking to get an even bigger share of the public purse, are fast establishing regional offices or buying local, regional contractors to secure and deliver this work.

So do a quota of regional offices and an ability to diversify and migrate key skills across all sectors make a contractor recession-proof? Not at all, but it does carry some comfort to know that all bases are covered.