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Warning signs as productivity continues to be construction’s Achilles heel

Confidence amongst UK contractors has reached historic lows according to Turner & Townsend, as the number of new orders begins to reflect levels normally seen only in severe recessions.

Sentiment in the industry saw its third successive quarterly fall in Q2 2019, according to the most recent UK Market Intelligence Report from the global professional services business.    

The report points to falling rates of new orders, highlighted by the Office of National Statistics, as key drivers behind the crisis in confidence. Figures for the first quarter of 2019 show a decline of 12.8% on the same period in the previous year, on an annualised basis.

At the same time, Turner & Townsend’s analysis of material cost inflation at 3.4% highlights continued pressure on contractors’ margins.  

Against the backdrop of higher costs and falling order numbers, contractors regard the tendering environment as weak. 54.8% of respondents to Turner & Townsend’s survey described conditions as lukewarm, while only 10.8% of respondents expected the market to get warmer over the coming 12 months. 

Respondents to the survey identified all-too-familiar bugbears - political instability around Brexit, a lack of confidence in the market to invest in new projects, and skilled labour shortages - as being the greatest challenges facing the sector. 

However, analysis shows that poor productivity is being largely ignored, with it ranking third from bottom on the list of key challenges. 

Productivity in construction, when measured by output per job, has only increased by 14.8% in almost three decades. In that same period other industrial sectors have outpaced productivity gains in the construction industry. 

Paul Connolly, UK managing director of cost management at Turner & Townsend, said: “Construction’s dysfunctional relationship with productivity is being largely ignored. This is perhaps understandable as contractors contend with more pressing priorities. But if this is a burning platform moment for the industry, the productivity crisis is an engine room fire. 

“No one innovation will solve the construction industry’s productivity problems. When used intensively and intelligently though, modern methods such as off-site construction can deliver greater efficiency, quality, and confidence. Productivity is the Achilles heel of the construction industry. Left unchecked this weak spot will only get larger, severely limiting the sector’s future growth potential. This will leave a damaging legacy that will stifle progress long after the current cyclical issues fade.” 

Click here to read the full Turner & Townsend Market Intelligence Report