As profits plummet at the UK’s biggest contractors, the industry worries there is something fundamentally wrong with a business model that involves taking on so much risk in exchange for such low margins. Things are still looking up for housebuilders, though …

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It’s the time of year again when Building reveals its exclusive Top 150 contractors and housebuilders league tables. 

As well as full analysis of the results in the feature below the tables, the complete data set is now available, including:

  • Top 150 contractors and housebuilders by turnover
  • Top 20 contractors by contracting turnover 
  • Top 20 housebuilders by housing turnover
  • Top 10 housebuilders profit per house sale
  • Bonus data: Additional tables with aggregated data that allows you to compare total turnover with average margins

Top 150 contractors and housebuilders by turnover 

20182017CompanyTotal turnover £000Change on 2017Pre-tax profit £000Year endContracting £000Housing £000Property £000Services £000Other £000
1 1 Balfour Beatty 8,264,000 -1.24% 117,000 Dec-17 6,649,000     1,061,000 524,000
2 3 Barratt Developments 4,650,200 9.80% 765,100 Jun-17   4,589,100 61,100    
3 4 Kier 4,282,300 4.90% 25,800 Jun-17 2,019,400 375,700 182,000 1,688,100  
4 6 Taylor Wimpey 3,965,200 7.86% 682,000 Dec-17   3,965,200      
5 5 Interserve 3,666,900 -0.50% -244,400 Dec-17 1,338,700     1,881,400 229,000
6 7 Persimmon 3,422,300 9.10% 966,100 Dec-17   3,422,300      
7 11 Laing O’Rourke 3,172,500 26.23% -66,900 Mar-17 3,172,500        
8 12 Galliford Try 2,820,200 5.61% 58,700 Jun-17 1,526,900 1,267,600     25,000
9 9 Morgan Sindall 2,792,700 9.02% 64,900 Dec-17 1,332,600 473,500 185,900 66,200 734,500
10 8 Berkeley 2,703,700 -0.73% 934,900 Apr-18   2,703,70      
11 10 Amey 2,591,024 2.33% -43,878 Dec-16       2,591,024  
12 13 Bellway 2,558,561 14.19% 560,723 Jul-17   2,558,561      
13 14 Mitie 2,203,700 3.78% -24,700 Mar-18       2,203,700  
14 16 Keller 2,070,600 16.33% 110,600 Dec-17 2,070,600        
15 15 Mace 2,036,888 -0.20% 23,012 Dec-17 1,632,768   16,800 387,320  
16 18 Costain 1,728,900 4.28% 38,900 Dec-17 1,728,900        
17 22 ISG 1,708,800 28.55% 9,100 Dec-17 772,700       936,100
18 21 Redrow 1,660,000 20.12% 315,000 Jun-17   1,660,000      
19 20 Skanska UK 1,650,581 19.30% 23,647 Dec-16 1,650,581        
20 17 Bam UK 1,631,328 -4.56% 32,083 Dec-17 1,579,528   300 51,500  
21 19 Wates 1,621,973 5.88% 32,892 Dec-17 1,320,497 35,650   170,246 3,809
22 23 Willmott Dixon 1,296,414 6.00% 33,510 Dec-17 1,168,326       128,088
23 26 Multiplex Construction Europe1 1,155,385 11.53% 4,213 Dec-17 1,155,385        
24 27 Crest Nicholson 1,043,200 4.63% 207,000 Oct-17   1,043,200      
25 25 Bovis Homes 1,028,223 -2.52% 114,001 Dec-17   1,028,223      
26 - Engie2 987,380 -12.36% 33,323 Dec-16       987,380  
27 30 Bowmer & Kirkland 928,252 -0.26% 64,440 Aug-17 928,252        
28 34 Bloor Homes 917,705 27.73% 152,521 Jun-17   917,705      
29 28 Mears 900,184 -4.25% 26,484 Jun-17       766,121 134,063
30 29 Vinci Construction UK 870,705 -8.23% 22,430 Dec-17 626,923     223,636 20,156
31 33 VolkerWessels UK 870,381 -0.74% 18,911 Dec-17 738,987     114,307 17,087
32 32 Sir Robert McAlpine/Newarthill 869,609 8.74% -43,200 Oct-16 813,472   8,485   47,652
33 43 Countryside Properties 845,800 25.99% 141,700 Sep-17   845,800      
34 31 Lendlease Europe 800,363 -10.94% 41,505 Jun-17 670,628   129,735    
35 36 Homeserve 785,000 23.97% 98,300 Mar-17       785,000  
36 40 Cala 747,928 27.40% 70,445 Jun-17   747,928      
37 39 J Murphy3 711,900 15.96% 12,400 Dec-17 711,900        
38 35 McCarthy & Stone 660,900 3.93% 92,100 Aug-17   660,900      
39 38 Morrison Utility Services 655,488 6.76% 23,605 Mar-17       655,488  
40 106 McLaren Construction 600,345 24.94% 3,204 Jul-17 600,345        
41 44 Robertson 579,872 27.82% 26,147 Mar-17 458,022 80,232     41,618
42 42 John Graham 565,921 11.43% 16,056 Mar-17 565,921        
43 41 Renew Holdings 560,838 6.68% 16,302 Sep-17 106,835     452,423  
44 51 Bouygues 555,626 58.95% -78,458 Dec-16 555,626        
45 45 Carey 549,220 27.52% 19,118 Mar-17 475,295 46,111     27,811
46 49 NG Bailey 500,300 22.77% 18,600 Feb-17 500,300        
47 - Eurovia UK 486,224 -2.45% 22,210 Dec-17       486,224  
48 141 McLaughlin & Harvey4 465,789 9.06% 11,068 Dec-17 411,284       54,505
49 47 Winvic Construction 462,075 10.61% 28,479 Jan-17 462,075        
50 24 Keepmoat Homes5 423,199 25.70% 25,435 Mar-17   423,199      
51 48 Buckingham Group Contracting6 423,085 3.62% 16,582 Dec-17 423,085        
52 63 Keltbray 417,543 13.03% 23,358 Oct-17 417,543        
53 61 Hill Holdings7 415,603 13.16% 47,182 Dec-17 239,753 175,850      
54 55 Henry Boot 408,486 33.14% 55,392 Dec-17 81,876   250,418   76,192
55 68 Galliard 391,913 49.97% 74,010 Mar-17 166,742 225,171      
56 67 Northstone (NI) 374,984 43.45% 4,342 Dec-16 312,737       62,246
57 56 Ardmore Construction 370,009 22.17% 15,499 Sep-17 370,009        
58 71 Avant Homes 368,973 3.43% 20,631 Apr-17   368,973      
59 53 Osborne 348,299 1.70% 3,594 Mar-17 307,599     40,700  
60 52 Integral UK8 343,029 6.13% 11,831 Dec-16       343,029  
61 78 McAleer & Rushe 334,073 37.55% 13,386 Dec-17 334,073        
62 50 SSE Contracting 330,000 -6.75% -5,000 Mar-17       330,000  
63 54 Byrne 321,657 -2.34% 1,660 May-17 321,657        
64 77 Telford Homes 316,241 8.33% 46,308 Mar-18   316,241      
65 60 T Clarke 311,200 11.70% 7,100 Dec-17 311,200        
66 66 Watkin Jones & Sons 301,914 13.08% 43,278 Sep-17 256,138 19,292   6,126 20,358
67 59 Lakehouse 299,526 -8.46% -3,053 Sep-17 61,762     230,296  
68 72 North Midland Construction 291,770 16.48% 1,004 Dec-17 291,770        
69 69 Higgins 290,632 11.61% 6,561 Jul-17 204,225 86,407      
70 75 FM Conway 290,234 -1.27% 23,463 Apr-17       290,234  
71 65 Carter 286,404 7.05% 8,245 Dec-16 286,404        
72 64 Morris Homes 283,651 5.74% 27,618 Mar-17   283,651      
73 82 Ogilvie 274,444 24.87% 5,349 Jun-17 142,731       131,713
74 70 Clancy 270,246 5.09% 746 Mar-17       270,246  
75 76 Emcor 264,693 10.00% 7,469 Dec-17       264,693  
76 58 Spie 262,976 -5.52% -24,627 Dec-16 262,976        
77 79 Severfield 262,224 9.55% 18,055 Mar-17 262,224        
78 74 Emerson Developments 252,457 1.56% 71,949 Apr-17   125,653 134,889    
79 - Babcock Rail 251,052 12.78% 12,196 Mar-17 251,052        
80 62 Esh 242,738 -11.91% 3,800 Dec-16 173,526 7,402   49,474 3,721
81 84 Stewart Milne 240,549 14.97% -13,711 Jun-17   188,895     51,654
82 117 J Reddington 239,768 49.76% 10,609 Dec-17 239,768        
83 46 Sisk & Son 239,344 -42.93% -10,937 Dec-16 239,344        
84 37 Places for People9 234,192 137.12%   Mar-17   234,192      
85 - MV Kelly 232,973 34.52% 12,145 May-17 232,973        
86 89 Cruden Holdings 230,184 22.87% 10,452 Mar-17 160,464 40,088     83
87 73 Rydon 230,128 -7.67% 9,237 Sep-17 151,672 27,435   48,400  
88 85 City Building (Glasgow) 219,231 5.18% -5,640 Mar-17 64,232     121,603 33,973
89 93 William Hare 217,767 21.10% 2,395 Dec-16 217,767        
90 94 Fairview (Holdings) 216,389 -27.40% 44,465 Dec-17   216,389      
91 105 Seddon 215,748 2.79% 5,300 Dec-17 163,815 51,933      
92 - Michael J Lonsdale 215,325 15.06% 7,073 Sep-17 215,325        
93 83 Midas 213,634 -0.99% 1,626 Apr-17 213,634        
94 90 Forth Holdings 204,568 9.99% 12,274 Aug-17 139,751     64,626 191
95 96 Henmead 201,345 13.49% 5,973 Dec-16 196,498   12,094 12,093 8,223
96 104 Weston 198,601 28.90% 22,409 Jul-17   198,601      
97 88 Mount Anvil 197,985 -21.45% 11,804 Dec-16   197,985      
98 100 Wain 194,744 15.95% 42,789 Jun-17   194,744      
99 103 Croudace Homes 181,974 8.41% 17,508 Dec-17   181,974      
100 95 Briggs & Forrester 181,716 2.40% 5,663 Oct-17 181,716        
101 81 United House 180,713 -18.08% 6,378 Mar-17 180,713        
102 98 Tolent 178,413 3.01% 3,680 Dec-17 178,413        
103 - Churchill Retirement 177,962 -6.56% 54,198 Jun-17   177,962      
104 123 McLeod (Contractors)10 165,663 42.44% 17,974 Nov-16 165,663        
105 - MJ Gleeson 160,384 12.89% 33,012 Jun-17   130,492     29,892
106 - Sorbon Homes 160,381 3.46% 48,515 Dec-16     160,381    
107 124 Hopkins Homes 157,477 35.42% 38,177 Apr-17   157,477      
108 115 Hochtief UK Construction 155,053 19.21% -3,183 Dec-16 155,053        
109 - Erith 152,870 1.92% 10,225 Sep-17 152,870        
110 109 Caddick 152,435 2.56% 7,958 Aug-17 92,303   42,459   11,528
111 87 RG Schultz (previously EnServe) 152,400 -24.03% 10,500 Apr-17       152,400  
112 121 Beacon Hill 151,661 25.19% 21,878 Dec-16   116,405     35,256
113 116 Lindum Construction Company 149,898 17.16% 7,253 Nov-17 128,353 15,871     5,673
114 - Novus Property Solutions11 148,553 14.03% 5,441 Dec-17 148,553        
115 119 Canary Wharf Contractors12 148,442 18.76% 69,758 Dec-16 148,442        
116 122 Gilbert-Ash 148,004 26.15% 1,416 Dec-16 148,004        
117 97 Mulalley & Company 147,763 -15.43% 6,259 Mar-17 147,763        
118 102 RGCM 147,355 -10.80% 1,414 Dec-16 147,355        
119 113 Abbey Developments 147,177 7.33% 45,980 Apr-17   147,177      
120 130 Gratte Brothers 145,991 39.80% 1,411 Mar-17 145,991        
121 114 EW Beard 144,531 5.61% 4,397 Dec-17 144,531        
122 132 Shaylor 143,803 42.60% 6,955 Sep-17 143,803        
123 108 Dawnus Construction 143,751 -3.38% 4,036 Dec-16 143,751        
124 91 Lorne Stewart 139,947 3.46% -8,511 Dec-17 139,947        
125 126 Stepnell Holdings 138,707 1.45% 762 Mar-17 138,707        
126 107 Axis Europe 137,697 -7.84% 7,437 Mar-17       137,697  
127 - One Group Construction 135,518 6.35% 6,905 Dec-16 106,745   1,071   27,702
128 - CJ O’Shea 132,800 - 20,078 Mar-17 112,588   6,634   13,577
129 110 Masterson Holdings 129,204 -10.25% 10,520 Aug-17 129,204        
130 149 Strata Homes 128,509 175.11% 18,866 Jul-17   128,509      
131 120 Durkan 124,047 0.69% 4,258 Nov-17 124,047        
132 118 Thomas Armstrong 122,984 -3.39% 17,992 Oct-17 35,949       87,036
133 142 Barhale Construction 121,770 50.52% 2,159 Jun-17 121,770        
134 112 Simons 119,867 -15.50% -3,882 Mar-17 107,521   10,052 2,294  
135 111 Clugston 118,173 -17.61% 1,039 Jan-17 101,615   504   16,054
136 - Breheny Group 114,939 41.74% 1,088 Mar-17 114,939        
137 150 Spencer 113,204 153.11% 5,408 Mar-17 113,204        
138 145 William Davis 106,543 60.40% 13,978 May-17   106,543      
139 128 GF Tomlinson 105,102 -13.50% 3,866 Dec-16 101,035       4,066
140 134 Readie Construction 104,923 13.76% 6,005 Mar-17 104,923        
141 125 Styles & Wood 104,712 -8.94% 3,540 Dec-16 52,521     52,191  
142 - Jelson 102,769 4.31% 17,643 Apr-17   102,769      
143 - Prater 97,975 -3.67% 5,819 Dec-17 97,975        
144 - Van Elle 94,093 11.75% 9,283 Apr-17 94,093        
145 137 Renaker Build 88,537 68.99% 2,782 Oct-16 88,537        
146 101 Van Oord UK 87,855 -46.94% 8,971 Dec-16 87,855        
147 135 Ian Williams 85,933 -4.41% 4,204 Nov-17 85,933        
148 127 Headcrown 85,799 -19.50% -1,695 Sep-17 85,799        
149 139 Clegg 84,222 -0.40% 589 Dec-16 84,222        
150 - 8Build 83,956 19.96% 2,126 Mar-17 83,956

Top 20 contractors by contracting turnover

20182017CompanyTotal turnover £000Pre-tax profit £000Year endContracting £000
1 1 Balfour Beatty 8,264,000 117,000 Dec-17 6,649,000
2 2 Laing O’Rourke 3,172,500 -66,900 Mar-17 3,172,500
3 6 Keller 2,070,600 110,600 Dec-17 2,070,600
4 5 Kier 4,282,300 25,800 Jun-17 2,019,400
5 8 Costain 1,728,900 38,900 Dec-17 1,728,900
6 13 Skanska UK 1,650,581 23,647 Dec-16 1,650,581
7 7 Mace 2,036,888 23,012 Dec-17 1,632,768
8 17 Bam UK 1,631,328 32,083 Dec-17 1,579,528
9 10 Galliford Try 2,820,200 58,700 Jun-17 1,526,900
10 12 Interserve 3,666,900 -244,400 Dec-17 1,338,700
11 3 Morgan Sindall 2,792,700 64,900 Dec-17 1,332,600
12 17 Wates 1,621,973 32,892 Dec-17 1,320,497
13 18 Willmott Dixon 1,296,414 33,510 Dec-17 1,168,326
14 15 Multiplex Construction 1,155,385 4,213 Dec-17 1,155,385
15 16 Bowmer & Kirkland 928,252 64,440 Aug-17 928,252
16 19 Sir Robert McAlpine13 869,609 -43,200 Oct-16 813,472
17 14 ISG 1,708,800 9,100 Dec-17 772,700
18 - VolkerWessels UK 870,381 18,911 Dec-17 738,987
19 - J Murphy 711,900 12,400 Dec-17 711,900
20 - Lendlease Europe 800,363 41,505 Jun-17 670,628

Top 20 housebuilders by housing turnover

20182017CompanyTotal turnover £000Change on 2017Pre-tax profit £000Year endContracting £000Housing £000Property £000Services £000Other £000
1 1 Barratt Developments 4,650,200 9.80 765,100 Jun-17   4,589,100 61,100    
2 2 Taylor Wimpey 3,965,200 7.86 682,000 Dec-17   3,965,200      
3 3 Persimmon 3,422,300 9.10 966,100 Dec-17   3,422,300      
4 4 Berkeley 2,703,700 -0.73 934,900 Apr-18   2,703,700      
5 5 Bellway 2,558,561 14.19 560,723 Jul-17   2,558,561      
6 6 Redrow 1,660,000 20.12 315,000 Jun-17   1,660,000      
7 11 Galliford Try 2,820,200 5.61 58,700 Jun-17 1,526,900 1,267,600     25,000
8 8 Crest Nicholson 1,043,200 4.63 207,000 Oct-17   1,043,200      
9 7 Bovis Homes 1,028,223 -2.52 114,001 Dec-17   1,028,223      
10 10 Bloor Homes 917,705 27.73 152,521 Jun-17   917,705      
11 15 Countryside Properties 845,800 25.99 141,700 Sep-17   845,800      
12 14 Cala 747,928 27.40 70,445 Jun-17   747,928      
13 12 McCarthy & Stone 660,900 3.93 92,100 Aug-17   660,900      
14 - Morgan Sindall 2,792,700 9.02 64,900 Dec-17 1,332,600 473,500 185,900 66,200 734,500
15 17 Keepmoat Homes 423,199 25.70 25,435 Mar-17   423,199      
16 16 Kier 4,282,300 4.90 25,800 Jun-17 2,019,400 375,700 182,000 1,688,100  
17 - Avant Homes 368,973 3.43 20,631 Apr-17   368,973      
18 - Telford Homes 316,241 8.33 46,308 Mar-18   316,241      
19 20 Morris Homes 283,651 5.74 27,618 Mar-17   283,651      
20 13 Places for People9 234,192 137.12   Mar-17   234,192

It’s not what’s included in this year’s Top 150 contractors and housebuilders tables that’s most significant – but what is omitted. A single name sits like the proverbial elephant among the industry’s great and good, casting a shadow over everything else: Carillion. 

In last year’s ranking of the biggest UK construction firms, the collapsed contractor occupied the number two spot, with turnover of £5.2bn, second only to Balfour Beatty. Without Carillion, which went into liquidation in January, the industry is certainly diminished numerically – turnover among the top contractors is down year-on-year by nearly £1bn to £64.5bn. And they appear diminished in other ways too, facing an uncertain economic future at a point when so many questions are being asked about their financial stability.

But it’s not all bad news. The past year saw housebuilders report their fifth year of growth, with turnover, profit and margins all up. As a whole, turnover from the top 150 reached its highest ever level, topping £103bn. But even housebuilders are now squaring up to a more uncertain future, with prices and sales rates stagnating, albeit from a position of strength (see “The housebuilders’ story”, below). 

Major failures concentrate the mind … [following Carillion’s collapse] there is an acknowledgment from all sides that we need to seek a more sustainable future for our industry

Paul Cossell, ISG

For contractors, however, the tables paint a worrying picture, with the top 10 businesses making a pre-tax profit margin of just 0.38% on their £31bn of turnover – that’s less than £120m.

And the tables point to a growing disparity between the biggest firms and those further down the tables that seem able to pull in much healthier margins. So which firms are prospering, which are struggling, and what do the tables say about the industry overall?

Tough times

Carillion’s absence aside, the firms’ ranking by turnover has a familiar look. It’s topped by Balfour Beatty, and many players – such as Barratt, now the second biggest firm, and Kier, now third – have just nudged up one place. 

A few, particularly housebuilders, recorded big turnover increases that allowed them to do better than that, notably Redrow, Bloor Homes and Countryside, which all jumped several spots.

But for those contractors that achieved the same thing, turnover growth appears to have come at the expense of profitability, with Laing O’Rourke’s return to the turnover top 10 accompanied by a loss, and Galliford Try’s by a big fall in profit.

Altogether, the contractors and housebuilders in the top 150 made a combined £6.8bn of profit from £103.5bn of turnover. But the longstanding disparity between the profitability of housebuilders and contractors remains as prominent as ever.

Ultimately contracting feels like hard graft for the return you get. The whole model continues to not feel right

Jan Crosby, KPMG

For the contractors on the list the average margin edged up to 1.7%, whereas housebuilders pulled in 13.8%. And while housebuilders make up less than one-third of the firms in the top 150, they account for 87% of the profit recorded. 

That this position is so bad is in part due to the number of contractors continuing to report the effects of problem jobs. Interserve’s whopping £244m loss on its disastrous foray into energy-from-waste projects sits alongside smaller but still huge reported losses at Bouygues (£78m), Laing O’Rourke (£67m), Amey (£44m) and Newarthill/Sir Robert McAlpine (£43m). In contrast, none of the 18 firms reporting losses are housebuilders. 

Former Kier chief executive Paul Sheffield, now a non-executive director at Dutch contractor Royal Bam, says the losses represent the “tail end” effects of projects picked up in the “very competitive environment” of 2013-14. 

However, there have now been five consecutive years, according to government data, of construction output growth, and for Jan Crosby, managing director at KPMG in the UK, these continued problems indicate inherent weaknesses in the contracting model. 

“Ultimately contracting feels like hard graft for the return you get. The whole model continues to not feel right. How can these margins be sustainable when there are such large levels of risk transfer [to contractors]?”

Of course, market fears are heightened in the wake of Carillion’s collapse – there are still some who worry that a second Carillion-style collapse of a major contracting name is possible. “It’d be wrong to say it can’t possibly happen,” says Kevin Cammack, analyst at financial adviser Cenkos.

Paul Cossell, chief executive of the contractor ISG, which has recovered from recent falls to be ranked 17th in this year’s tables, says: “Major failures invariably concentrate the mind, and I think in this instance there is an acknowledgment from all sides that we need to seek a more sustainable future for our industry. We’re seeing that customers are looking further than just price and really interrogating bids and submissions to ensure that what is proposed is realistically achievable.”

Contractors are getting paid more slowly than ever, while government is now leaning on them to pay their suppliers ever more quickly

Alastair Stewart, Stockdale Securities

At the same time, investors in the sector are calling on contractors to urgently focus on strengthening their balance sheets – something Kier, Interserve and Galliford Try are all focusing on, with debt levels and cash positions being closely watched.

But their ability to manage their cash positions by withholding payments to suppliers is reducing, with major clients such as Network Rail seeking to enforce rapid payment, and legislation in progress that would ban the use of retentions. 

Alastair Stewart, analyst at financial adviser Stockdale Securities, says: “Contractors are getting paid more slowly than ever, while the government is now leaning on them to pay their suppliers ever more quickly. Cash flow is the key issue.” 

The economic outlook, too, provides few reasons to be cheerful. So far this year ONS data has given mixed signals over the health of the construction market, but with the Construction Products Association forecasting stagnation this year and continuing worries over the result of Brexit negotiations, there are reasons to be nervous. 

Brendan Kerr, chief executive of demolition and groundworks specialist Keltbray, ranked 52nd, says: “Everyone knows the market is unsettled, but so far there’s still a sense of hope. You’ve got your umbrella out and know the rain’s coming, but so far the sun is still shining.”

Steve Beechey, group strategy director at contractor Wates Group, ranked 21st, says some are taking a more negative view: “Bidding is tightening up, with people worried about where the work will be the year after Brexit,” he says. “There are early signs of contractors panicking and going in with very low margins.” 

More positive, however, are signs that clients nervous of being left with the next Carillion on their hands are making more use of framework contracts, which give some certainty of workload. 

ISG’s Cossell says: “The trend for 2018 is a strengthening in the volume of framework schemes being considered. There is certainly renewed interest in frameworks, both from a contractor and customer perspective. Frameworks foster collaboration and the sharing of best practice and innovation, and that’s a key pathway we should be steering towards as an industry.”

Dysfunctional

Nowhere is the somewhat dysfunctional nature of contracting more clear than in the inverse relationship between size and profitability. While the biggest housebuilders take advantage of market dominance and economies of scale to deliver sector-leading margins far above their smaller rivals, in contracting the opposite relationship is true. 

The top 10 contractors make just 0.38% pre-tax profit margins, while the top 50 contractors make, at 1.15%, three times as much. Looking at the contractors ranked 50-100, it’s an entirely different ballpark, with these firms reporting a genuinely healthy average margin of 5.2%. This means that these much smaller companies actually make four times as much pre-tax profit on just one-quarter of the revenue of the top 10 firms.

The problem for the big firms seems to be a combination of the difficulty of effectively managing businesses of such scale, the requirement to engage in general contracting rather than develop niche specialisms, and the inherent riskiness of large, complex, multi-year construction projects. 

KPMG’s Crosby says: “Large contracts are inherently more risky propositions. If a job only lasts 12 months, you can procure your suppliers at the point you win it. But if you’ve got a contract that lasts three years, you can’t possibly lock in those costs up-front.”

Certainly, it’s noticeable that, of the very biggest contractors, it’s the likes of Morgan Sindall, Wates, Willmott Dixon – which tend to take on large numbers of small- and medium-sized jobs – that have retained margins of more than 2%. 

Meanwhile megaprojects are often the source of big losses, from Laing O’Rourke’s CHUM hospital in Montreal to the Aberdeen Western Peripheral Bypass that damaged Balfour Beatty, Galliford Try and Carillion.

Moreover, the fact that any reduction in turnover tends to suck cash out of contracting businesses as suppliers are paid makes it very hard to reduce the scale of an operation when the market so demands, tempting firms to bid low to secure turnover. “It’s a big mouth to feed, and it’s really tricky to manage,” says Crosby.

All of which hardly sounds like the world-beating industry heralded in the government’s recent sector deal for construction. Instead, low profit has meant low investment in innovation. 

“The government is right to push on offsite manufacturing,” says Wates’ Beechey, “but how can firms invest when they’re on such slim margins? The question is whether the industry needs to go through some sort of a reset.” 

ISG’s Cossell, for one, thinks it’s possible: “The future of our industry rests on our ability to generate consistent and sustainable returns for the work we deliver, and tier-one contractors need to lead by example. 

”It’s about technological innovation and adoption, smarter ways of working, enhanced operational efficiencies and the people we employ. It’s also about open and honest conversations about risk, capability and capacity.”

Whether that can actually be achieved is much harder to foresee.

The housebuilders’ story

Housebuilders in the top 150 accounted for 42% of the turnover (£43.6bn) and 87% of the pre-tax profit (£6bn) of the firms ranked. While smaller housebuilders showed some signs of catching up with the biggest in terms of turnover, the top 10 housebuilders retained their dominance in profitability, making two out of every three pounds of profit in the whole Top 150 at an average pre-tax profit margin of 19.2%. This compares with 13.8% for housebuilders in general. 

The single most profitable housebuilder, Berkeley, made £220,000 in profit out of every single house it sold. While average wages at housebuilders rose by 1.4% over the past year, the remuneration of the highest-paid director increased by an average of 95% – boosted by Persimmon’s controversial bonus scheme. Discounting Persimmon, director remuneration still rose by 14% on average.

However, the first signs of weakness have started to appear following years of quick growth, with the likes of Bovis Homes, Crest Nicholson and McCarthy & Stone all announcing profit warnings over the past 18 months. Kevin Cammack, analyst at Cenkos, says: “We’re definitely getting late on in the market cycle, albeit we’re not where we were in 2008 where we were facing devastating collapses. Housebuilders have infinitely stronger balance sheets than then.” 

Weighing on the sector are slowing sales rates, particularly in London and the South-east, the spectre of future interest rate rises, and fears that existing government support in the form of Help to Buy won’t be sustained indefinitely. “The political climate is much more changeable,” says Cammack. “Can the current incredible support to the sector continue?”

Jan Crosby, managing director at KPMG, says that in response housebuilders need to ensure they are not carrying high levels of debt, and consider diversifying away from total reliance on building homes for sale: “They need to think about build to rent. It allows them to de-risk their revenues while showing government they are doing what they can to find ways to accelerate construction.”  

BONUS DATA:

Top 10 housebuilders’* profit per house sale

HousebuilderAverage selling priceHomes soldPre-tax profit per home sold

Barratt Developments

£313,100

 17,395 

£47,387

Taylor Wimpey

£264,000

 14,541 

£57,328

Persimmon 

£213,321

 16,043 

£60,219

Berkeley Group

£715,000

 3,536 

£220,475

Bellway Plc

£260,400

 9,644 

£59,265

Redrow Group 

£309,800

 5,416 

£59,453

Galliford Try

£354,000

 3,890 

£47,609

Crest Nicholson

£340,000

 2,935 

£72,095

Bovis Homes

£272,400

 3,645 

£35,125

Bloor Homes

£300,000

 3,023 

£52,002

*Housebuilders ranked by overall turnover

Aggregated data for housebuilders

 Turnover - Most RecentTurnover - PreviousPre-tax Profit LatestAverage margin
All housebuilders £43,560,176,792 £39,764,331,891 £5,997,157,795 13.77%
         
Top ten £24,769,289,000 £22,835,012,000 £4,756,045,000 19.20%

Aggregated data for contractors

 Turnover - Most RecentTurnover - Previous*Pre-tax Profit LatestAverage margin
All contractors £64,500,431,472.00 £65,305,647,142.00 £1,093,821,132.00 1.70%
         
top 10 £31,324,197,000.00 £35,105,076,000.00 £118,442,000.00 0.38%
         
top 50 £55,561,430,131.00 £57,093,425,546.00 £637,523,112.00 1.15%
         
Ranked 50-100 £8,411,778,894.00 £7,642,743,687.00 £437,819,247.00 5.20%

* turnover for previous year includes Carillion turnover, despite not being on this year’s list

 

Methodology

This Top 150 construction company analysis refers to those companies identified by Hewes & Associates as the Top 150, which have results available for 2017/18, and which are housebuilders, building and civil engineering contractors, building fit-out contractors, M&E, and FM/building/civil engineering or maintenance companies. 

Larger companies whose 2017/18 results are not yet available have been included  with their 2016/17 results, while smaller companies in such a position have not been included. 

Turnover includes joint ventures. Ranking comparisons have been affected by the inclusion of companies that were not included in last year’s rankings, and owing to revised methodology, and some cases where there have been changes in corporate reporting, such as a different year end, comparators on figures published last year are not always possible. 

Data compilation and analysis was undertaken by Hewes & Associates, to which any queries on the data should be directed: 01428 641518, hewesinfo@aol.com or at www.hewes-associates.com

Notes

1 Multiplex Construction changed name from Brookfield Multiplex (renamed in 2017)

2 Engie figures include Engie FM and Keepmoat Regeneration, acquired by Engie UK on 1 March 2017; Engie FM has year end  of Dec 2016, Keepmoat Regeneration has March 2017

3 J Murphy 2017 results taken from press release

4 McLaughlin & Harvey owns Barr & Trench, included in these data 

5 Keepmoat Homes disposed of regeneration business in 2017

6 Buckingham Group Contracting 2017 data are from draft accounts

7 Hill Holdings; Partnerships used last time

8 Integral UK is now owned by JLL

9 Places for People profit data not available 

10 McLeod (Contractors) data refers to

2016 accounts

11 Novus Property Solutions is owned by the Seddon family, but not part of Seddon Group and so listed separately

12 Canary Wharf Contractors – no cost of sales data for 2017

13 Figures for Newarthill, the parent company of Sir Robert McAlpine 

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