Is the Construction Industry Ripe for a New Operating Model?
The construction sector is a huge part of the UK economy, producing an output of £138bn in 2016 and employing 1.2 million personnel directly. Including those indirectly employed would add a further 1.5 to 2.0 million people to that figure.
The notoriously cyclical sector has been in modest growth mode in recent years both in the UK and globally, but the construction industry has also faced major changes to market conditions, and to the industry’s operating structures.
While some businesses are responding to these challenges, the industry has, in many respects, been slow to react. We believe the time is right for a fundamental rethink of operating models in the light of new business conditions.
Performance of UK Construction
The UK construction sector has over-capacity and is fiercely competitive. Increased competition has impacted margins negatively compared to European and global counterparts.
We analysed a statistically random sample of 100 construction businesses, with 17 companies having a turnover of above £2.5 billion returning an average EBITDA margin of 2.6%.