Impact of war in Ukraine and increasing cost of finance for clients blamed for woes

Tier 1 contractors in the capital have said they are struggling to fill order books for new work for 2023 with the amount of work not yet secured up by two-thirds compared to last year.

Aecom surveyed Tier 1 and 2 contractors with a combined turnover of £6bn and working on schemes over £50m in the London market.

It found that 25% of Tier Ones’ new orders’ books had not yet been filled – compared to the 15% which was missing a year ago.

Reasons given for the shortfall were the war in Ukraine, rising costs of labour and materials and domestic political instability which last year saw the UK have three prime ministers in a little over three months. The increased cost of financing schemes, which increased in the wake of Liz Truss’s mini-Budget last September, was also singled out.

london work

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Work continues last month at the redevelopment of Elephant & Castle in south London being carried out by Multiplex. But an Aecom survey says there are more gaps in the order books of Tier Ones than this time last year

Firms reported several jobs being delayed or cancelled while trades where demand was at its fiercest included M&E, steelwork, drylining, façades and cladding.

While Tier 1 firms were struggling to replenish order books, Tier 2 contractors were up on workloads compared to 12 months ago.

The survey said they had 88% of their order books filled for this year, up from 74% last year.

The survey reveals that inflation is the biggest challenge facing the industry, affecting everything from material and labour prices to outputs on site and procurement routes.

Aecom’s managing director for buildings and places in Europe and India, Jo Streeten, said: “The signs of a slowdown in construction will hamper growth in London, with more construction businesses going through insolvencies and less output on some projects that are already on site. The next 12 months will test main contractors’ business models, with the ones able to collaborate with their clients and supply chains most likely to thrive.”

But she added that contractors expect refurbishments to be a key growth market, as developers look to extend the life of their existing assets and to meet their sustainability and net zero targets.

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