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Construction margins have plummeted to their lowest level for 15 years, according to research released today (13 November) by industry analysts Glenigan.

The 2014 UK Construction Key Performance Indicators Annual Report found industry profitability has dropped to 2.1% - the lowest level since the Construction KPIs were first launched in 1999.

It also marks the fourth consecutive decline in industry profitability – down from 2.7% recorded in the previous report in 2012 – as the market continues to suffer the after effects of the economic downturn.

Produced in partnership with the Construction Industry Training Board (CITB) and endorsed by the Department of Business, Innovation and Skills (BIS) and Constructing Excellence, the 2014 Construction KPIs suggest challenging economic conditions have undermined the industry’s efforts to deliver improved services to clients.

Despite improved predictability of project delivery, both to cost and budget, client satisfaction levels have largely decreased, with clients’ perception of value for money slipping to its lowest level since 2008. Client satisfaction for housing projects, in particular, showed a marked deterioration, with product and service scoring 74% and 62% respectively, the lowest level since 2003.

However, elsewhere in the report there are credible signs of improvement. The latest results show an overall increase in the predictability of construction projects, pointing to more positive situation with regards to the pipeline of work.

Cost predictability either improved or was maintained from 2012, while time predictability increased across all three measures. Project costs were on budget or better for 69% of projects - up from 61% recorded in 2012 and a new survey high.

Official Health and Safety Executive (HSE) statistics have recorded a sustained improvement in the industry’s Accident Incident Rate over the last decade. The rate fell to 420 reportable accidents per 100,000 employees in 2012/13 - a 21% reduction over the two years since the last KPI survey.

Other key findings include:

Allan Wilén, Economics Director at Glenigan, said: “The Construction KPIs reveal how companies have responded to a protracted industry recession that has re-shaped the sector over the last five years. They also highlight the challenges that firms now face if they are to seize opportunities as industry workload strengthens over the next two years.

“In particular, client’s expectations continue to rise and delivering improved productivity, containing costs and accelerating the delivery of projects will all be priorities.

“As the industry responds to these challenges, the KPIs provide firms with the benchmark against which they can appraise their own performance and identify where they can secure future improvements.”

Stephen Radley, Director of Policy and Strategic Planning at CITB, said: “The economic turmoil of recent years has certainly - and not unexpectedly - had a significant effect on the construction industry and its clients.

“However, the return to growth and with it the prospect of a large-scale infrastructure programme provides a huge opportunity for the industry - the opportunity to plan ahead with certainty, invest in skills and work with government to attract more young people into a sophisticated industry with great prospects and opportunities for secure highly-paid jobs and successful careers.

“The new economic climate presents the ideal opportunity for the construction industry to meet the challenge head on and develop and retain the skilled workforce it needs for economic and commercial success.

“Across the sector companies big and small have struggled with the day-to-day uncertainties of knowing where the next job is coming from, how long it will last and what it means for the future.”

Click here to download a copy of the report.

PR contacts:
Kirsty Maclagan (Marketing and Communications Manager)
T: +44 (0)1202 786 842│E: kirsty.maclagan@glenigan.com
 
Allan Wilén (Economics Director)
T: +44 (0)751 579 4625| E: allan.wilen@glenigan.com
 
Notes to the Editor:
Based on data from thousands of projects completed during the preceding year, the Construction Key Performance Indicators (KPIs) have become a mainstay of the industry since their initial development in 1998. The 2014 Construction KPIs were collated by Glenigan from surveys of construction clients, contractors, sub-contractors and consultants, based on projects completed during 2012 and 2013.

About Glenigan:
Glenigan is the UK’s leading provider of construction data, contract leads and construction market analysis. Combining comprehensive data gathering and exhaustive research with detailed statistical modelling and expert analysis, it delivers a trusted insight into UK construction trends and activity. Glenigan customers include government agencies, construction companies and suppliers of materials and services to the industry.