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Do bigger construction order books equal bigger projects?

The industry’s biggest building contractors are nearly all taking on bigger contracts according to Glenigan’s construction industry analysis.

This research shows that the size of the average contract award increased over the past year at nine of the top 10 contractors in 2017.

Major projects such as HS2 and Battersea Power Station swelled orders at the likes of Balfour Beatty, Kier, Sir Robert McAlpine and VINCI

Glenigan’s market industry research also reflects differences in company strategies.

The largest average contract sizes are at Laing O’Rourke and Sir Robert McAlpine, which both tend to take on a smaller number of big projects.

In contrast, Morgan Sindall and Kier, which have large regional contracting operations, are at the opposite end of the scale and, on average, take on the smallest contracts.

Bigger job, bigger risk?

Typically, large projects bring in more cash in the short term but are riskier as penalties for failing to meet deadlines are line with the contract size so consequently larger.

Among the reasons for Carillion’s failure at the start of this year were problems on the £550 million Aberdeen Western Peripheral route project, yet the company continued to take on larger projects as its troubles worsened.

According to Glenigan’s construction market research, the average size of contract won by Carillion surged 70% as the company’s troubles spiralled.

In January 2017, the average contract won by Carillion was valued at £20 million. By December 2017, when the company was in its death throes, this measure had ballooned to £34 million.

From top to bottom

The building contractor with the biggest average contract size is Multiplex Europe, which like Laing O’Rourke and Sir Robert McAlpine, typically takes on and successfully manages a few big projects.

In 2017, the average contract award at Multiplex Europe was £161.3 million according to Glenigan’s industry analysis.

The Australian company took on a number of major projects in 2017, including the £700 million Market Towers scheme in Wandsworth, south London, and the £240 million Aykon London One development.

The building contractor in the top 100 with the smallest average contract value in 2017 was Beard.

A regional building contractor working in southern England, Beard was ranked in 70th position in Glenigan’s lost of top UK construction companies.

Beard takes on projects valued up to £16 million but in 2017 the average contract won by the company was just £2.6 million.

This measure has actually fallen compared to 2016, when the average contract won was £3.0 million.

However, Beard has still managed to grow revenue from £56 million in 2008 to £136 million.

Bigger projects are certainly helping the major contractors expand, but lower down the construction rankings this can still be successfully achieved without taking on the risk of big schemes.

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