Consultant warns of growing risk-aversion among firms
Gardiner & Theobald has said the impact of last year’s high-profile collapses will mean contractors will only price jobs they can be confident of being profitable.
Tolent, Henry Construction, Buckingham and MJ Lonsdale were among the firms that sank into administration last year with the collective impact sending jitters across the entire industry.
Meanwhile, Laing O’Rourke posted its worst ever set of figures with a pre-tax loss of £288m in the year to March 2023 while in the autumn ISG was forced to address rumours about the state of its finances.
G&T said building out current workloads meant contractors were not yet having to chase turnover to fill falling order books but it admitted that more firms would only price work they considered relatively risk-free.
In a Q1 forecast for 2024, the consultant said: “The heightened risk of supply chain insolvencies will only increase risk aversion among contractors, leading to greater caution when pricing work and agreeing contract terms for profitable work.”
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The consultant said its revised forecast for tender price inflation this year was now 2%, down from a previous estimate of 2.25% with the firm saying input and labour costs have begun to ease.
It added: “With market activity slowing in some sectors and deflationary pressures mounting, contractor pricing is expected to be more competitive in 2024.
“Although procurement conditions may become more favourable, interest rates and the high cost of debt remain a key pressure on viability.”
It said it expected an uptick of work in the commercial and retrofit sectors while residential work would remain below par.
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