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Major contractors face pressure as value of construction contracts drops

New figures released by construction analysts Glenigan reveal the intense competitive pressures still faced by the UK’s biggest contractors as the industry emerges from recession.

Glenigan’s latest Major Contractors Competitive Review found the value of contracts awarded across the industry in 2013 fell 6% to £48.1bn, despite an 8% rise in the number of projects awarded.

The report, produced in partnership with CNinsight, indicates this fall has had a knock-on effect on the UK’s top 50 contractors’ collective market share, which dropped 12% last year.

The decline in the value of projects awarded was principally due to a fall in larger value schemes, with a double-digit fall in contract awards worth £100m or more.

Conversely, there was an increase in the value of work awarded worth less than £5m and between £5m and £10m.

This shifting pattern of work has presented twin challenges for major contractors, according to Glenigan Economics Director Allan Wilén.

“The top 50 have faced increased competition from specialist contractors for the largest projects, especially civil engineering schemes,” he said.

“In addition, the top firms have ceded market share of the fast-growing pool of smaller value schemes.”

Wilén added: “Where the top 50 firms have been able to maintain or increase market share is in those areas that they are already dominant: building projects in the £20m to £100m value bands.

“The net result is that top 50 contractors’ collective market share fell from 64% to 52% of work awarded in 2013.”

For the top 50 contractors, 2013 was a year of decline in the value of project awards within most of the industry sectors. The sharpest falls were observed in the community and amenity, and civils sectors, though all of the traditionally commercial sectors (office, retail and hotel and leisure) saw double-digit declines.

Looking ahead, the construction pipeline is anticipated to grow steadily over the next two years. In addition, Glenigan is forecasting the strongest growth to be in sectors such as industrial and commercial buildings, which should provide a particular boost to top 50 contractors’ workload.

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