Construction firms are being squeezed by below-cost tendering – leading to a spate of collapses – according to the man at the top of one of the country’s most historic building firms.
Rick Willmott, chief executive of regeneration and support services company Willmott Dixon, said firms in the sector continue to struggle against the “construction recession” – which can linger long after GDP growth has returned elsewhere.
In recent weeks a series of construction companies in the region have called in administrators, and researchers are predicting a prolonged period of job losses in the sector.
Mr Willmott said while Willmott Dixon is shielded by its diverse portfolio, conditions remain tough.
He said: “Construction recessions are an unknown for people in other sectors.
“If you look at GDP statistics there has been growth for the last year-and-a-half but the construction sector gets the tail end of the recession.
“At the moment construction is at a very difficult, sensitive stage.”
He added: “The message that I get from third parties is that things are looking better in London and the South East and not so good in the North West and North East.
“Everyone is incredibly busy pricing work – they have never been busier pricing. The private sector has realised that now is an incredibly good time to buy construction activity because the price has changed and is now perhaps 15 to 20 per cent cheaper than it was two-and-a-half years ago,
“There is more competition and less opportunity and an awful lot of below-cost tendering going on.
“That is a difficult downward spiral that someone has to break.”
Mr Willmott is the fifth generation of his family to work at the company founded in 1852 as John Willmott & Sons.
The operation in the West Midlands turns over about £200 million and about £75 million of that goes towards suppliers within a 25-mile radius of the city.
The group, named in third place in the 2009 Sunday Times Green companies list, employs about 1,000 people including in offices in College Road, Kingstanding, and Partons Road, Kings Heath.
Mr Willmott said the company has developed a mixed portfolio to safeguard it against fluctuations in the market – and parts of its operation were performing more strongly than others.
He said: “In general construction we have been successful in ensuring we have a place on regional and national frameworks – the Academy Framework is an example of that – which while the Government has slowed down spending, the ones we have been involved with have gone ahead.
“Had we focused more on the Building Schools For The Future programme then that workload would have disappeared.”
He added: “Other areas that are holding up well are things like local authority housing maintenance where it is a discretionary budget and standards have to be maintained.
“Those budget pots are reasonably robust because housing has to be kept at a standard. However, we have found significant savings in contracts over a five to 10-year period.”
Mr Willmott said the firm’s order book was 70 per cent full for this year and 25 per cent secure for next year.
However, elsewhere in the sector things are not as secure. In the last month alone, Coventry-based GAJ Group, Tipton-based Image Styles, Halesowen firm CPL Interiors and Armoury Demolition and Recycling have all collapsed.
Research from ConstructionSkills published in January predicted a “tough” year for construction with the loss of up to 76,000 jobs before it returns to growth.
It said the industry was expected to contract by one per cent in 2011.