Look to your chains

For workers at Daniel Contractors, Severfield Rowen or Mitie’s M&E division, our analysis this week about the dangers to contractors from a recovery in the market could be seen as some kind of sick joke.

The bad news for contractors has been pretty relentless this year, and those mentioned are just three names to have hit the headlines this week. Many, right up to Balfour Beatty, have been affected by falling workloads impacting on revenue and profit margins.

Notwithstanding any further shocks from the eurozone, the forward looking signals appear as positive as they have been for a few years

But - with apologies to those still hurting from the downturn - talk of a recovery really isn’t a joke. Because with the stock market at a 14-year high and business confidence rising, consultants are starting to report fuller order books, and new orders for main contractors are beginning to rise on the back of the increasingly (bizarrely?) buoyant private residential sector. Fragile? Yes. Deep-rooted? Not yet. But, notwithstanding any further shocks from the eurozone, the forward looking signals appear as positive as they have been for a few years.

Now is therefore the time when clever businesses are starting to think about what a recovery might mean, and how well set up they are to deal with it. Because with supply chain relationships put under severe strain through the recession, and much capacity lost, it would be easy for contractors to run into difficulty as things turn around.

This is because with fixed prices agreed in the depths of a very deep recession, contractors can end up making big losses when subcontract packages increase in value. It’s far too early days to say that this is a big problem right now - but unless contractors start managing their relationships with their supply chain, it could become a big issue very quickly when things do improve.

Companies still struggling with cash flow and looking glumly at empty order books will not find it easy to heed this advice. But without some focus on what may happen a year from now, firms might find the recovery even more damaging than the recession that preceded it.

Joey Gardiner, assistant editor

Learning from Stonehenge

The improvements around Stonehenge will undoubtedly enhance the visitor experience. Spending £37.8m over 20 years on numerous aborted schemes to settle on these improvements, is much less palatable. Proposals included three different types of road tunnel for a nearby trunk road and three different designs of visitor centre on four different sites.

The end result is a small single storey building (albeit an elegant one), a couple of upgraded roundabouts, and the closure of a short section of A road. The question is why was this so difficult to realise? The nasty taste left behind by the wasted millions could be mitigated if we were to learn something useful from this experience.

Future, high-profile and controversial projects should be properly costed from the start with the ambitions of these schemes commensurate with how much money is available to realise them.