Consultant warns of growing risk-aversion among firms

Gardiner & Theobald has said the impact of last year鈥檚 high-profile collapses will mean contractors will only price jobs they can be confident of being profitable.

Tolent, Henry Construction, Buckingham and MJ Lonsdale were among the firms that sank into administration last year with the collective impact sending jitters across the entire industry.

Meanwhile, Laing O鈥橰ourke posted its worst ever set of figures with a pre-tax loss of 拢288m in the year to March 2023 while in the autumn ISG was forced to address rumours about the state of its finances.

lonsdale

Last October鈥檚 collapse of M&E firm MJ Lonsdale sent shockwaves across the industry

G&T said building out current workloads meant contractors were not yet having to chase turnover to fill falling order books but it admitted that more firms would only price work they considered relatively risk-free.

In a Q1 forecast for 2024, the consultant said: 鈥淭he heightened risk of supply chain insolvencies will only increase risk aversion among contractors, leading to greater caution when pricing work and agreeing contract terms for profitable work.鈥

>>> See also Industry should look in the mirror: Laing O鈥橰ourke鈥檚 losses do no one any good

>>> See also Firms going bust, millions lost and all for a next-to-nothing margin. Who in their right mind would want to be a contractor?

>>> See also 鈥楾he industry is broken.鈥 The soul-searching begins as London M&E specialist succumbs to familiar foes

The consultant said its revised forecast for tender price inflation this year was now 2%, down from a previous estimate of 2.25% with the firm saying input and labour costs have begun to ease.

It added: 鈥淲ith market activity slowing in some sectors and deflationary pressures mounting, contractor pricing is expected to be more competitive in 2024.

鈥淎lthough procurement conditions may become more favourable, interest rates and the high cost of debt remain a key pressure on viability.鈥

It said it expected an uptick of work in the commercial and retrofit sectors while residential work would remain below par.