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Capability and capacity

Capability and capacity

07/12/2012 | Channel: Location, Materials, Major Project, Residential, Manufacture, Hire & Rental

Bill Phelps offers his predictions for the construction industry in 2013/14, and gives a view on the future of the industry over the next five years

As well as being a business partner to ex-Dragon James Caan, Bill Phelps boasts an impressive history in the construction industry as a chartered surveyor, successful property manager, and reputable construction consultant.

Bill is a partner at Hamilton Bradshaw Venture Partners, the growth advisory division of James Caan’s firm Hamilton Bradshaw, which assists SME business owners in rapidly growing and realising the value of their companies. Bill believes that working in conjunction with James and the expertise provided by the Hamilton Bradshaw group, SMEs in the construction sector can really capitalise on the slow, yet sure, signs of recovery in the market. With his experience in this field, he believes he can add value to any company and so help them realise their potential.

Bill points out that whilst the London Olympics boom, and the subsequent fall in workload were to be expected, the dip has been further compounded by public sector cutbacks, which are starting to be felt across the industry. The resulting drop in output had been estimated as high as 12 per cent, which would certainly cast a long shadow over prospects for 2013.

With an economy so freshly out of recession (and with the possibility of slipping back in still ever present), tender prices in the industry are still flat-lining, and he predicts will continue to do so well into 2013. Therefore, Bill thinks that a further weakening of workload of two per cent for the first two quarters of next year looks likely.

This is, unfortunately, a continuing trend. It’s worth noting that tender prices have already dropped by over ten per cent since 2007, as firms compete strongly for a market share that continues to shrink. Competition is still likely to be fierce for a long time, even with a recovering economy, so it is entirely possible that tender prices will remain stagnant for the foreseeable future. Q4 2012 has capped the longest decline in business since the beginning of the financial crisis in 2008. Rising fuel and energy costs, coupled with continuing obfuscation in planning departments and uncertainty in the next budget cut, lead to a relatively bleak outlook for recovery.

Inevitably as the sector’s capability and capacity thins out, however, competition will ease. The refurbishment market remains steady as landlords and owners seek to maintain asset value. Many corporates and indeed local authorities are seeking to rationalise their portfolios to ensure their estate serves them more effectively and cost and energy effectively in the new era.

It’s no longer news of course that London continues to defy the national trend, particularly in the residential sector, as overseas demand keeps prices high and construction demand strong. For the rest of the UK as well there are some signs of hope with mortgage approvals up and signs that bank lending restrictions are starting to ease – ‘but no, I am dreaming surely…’

This points therefore to some indicators that the residential market in general will pick up throughout 2013 and 2014, although not to the levels of the ten-year boom between 1998-2007. Sticking with fact, long-term, the growth will probably be muted up to 2017. Although it will not reach pre-recession levels by then, steady growth levels should have been achieved and well established by then.

Landmark infrastructure projects such as Crossrail also help maintain supply chain activity, but times are very tough for many firms despite a number reporting some modest growth in certain sectors, particularly education, hotels and corporates.

So what can we look forward to? Present indicators point to a modest recovery from 2014 onwards with tender prices increasing sharply when workload improves as contractors move to rebuild their margins.

However, as with most of the industries affected by recession, there is little belief that we can ever again regain the pre-recession level of business. As Bill comments: “I think the industry has changed forever and only a new banking and lending paradigm, coupled with a radical overhaul of the planning system and concomitant further elimination of small business bureaucracy, can stimulate our business and property development industries to anything like their former potential. I believe that SMEs are the backbone of the British economy, which is why I want to help maximise their growth.” 

With only fledgling growth likely in 2013 and 2014, it is especially important to try and capitalise on this and push the industry forward. Bill is confident that his partnership with serial entrepreneur James Caan is certainly part of the answer. “My partnership with James will place me in a position where I can work with firms to leverage growth and working together, I feel positive about the very important role SMEs in this industry now have and their potential as catalysts for future growth.”

Hamilton Bradshaw Venture Partners is the advisory division of Hamilton Bradshaw Limited, and offers a unique, highly involved and concentrated service that allows small to medium sized enterprises to successfully maximize their growth and optimise the timing of their market exit.

For further information, visit: http://hbvp.co.uk.