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| KN45003 |
| KEY NOTE BUILDING CONTRACTING : June 2003 |
| Overview |
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This report covers: building contracting, skills shortage, retirement age, National Construction Week, sustainable construction, Federation of Master Builders' Survey,
Companies covered include: Amec, Carillion, Balfour Beatty, Laing O'Rourke, Kier Group, Interserve,Taylor Woodrow, Morgan Sindall, Amey, Mowlem, Skanska,
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Table of Contents Executive Summary
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Engine| 1. Market Definition 8 |
| REPORT COVERAGE 8 |
| The Public Sector 8 |
| The Private Sector 8 |
| Market Sectors 8 |
| New Construction Work 8 |
| Repair, Maintenance and Improvement 9 |
| Types of Work 9 |
| Construction Process Definitions 9 |
| General Construction and Demolition Work 9 |
| Construction and Repair of Buildings 10 |
| Civil Engineering 10 |
| Installation of Fixtures and Fittings 10 |
| Building Completion Work 10 |
| Economic Trends 10 |
| Table 1: UK Resident Population by Sex (000 and percent), Mid-Years 1998-2002 11 |
| Table 2: Index of Growth in UK Gross Domestic Product at Current Prices (index 1995=100), 1997-2001 11 |
| Table 3: UK Rate of Inflation ( percent), 1998-2002 12 |
| Table 4: Unemployment Rate and Actual Number of Unemployed Persons ( percent and 000), 1998-2002 12 |
| MARKET TRENDS 13 |
| Increasing The Number of Trainees 13 |
| Monitoring Quality Within the Construction Industry 13 |
| Table 5: Key Performance Indicators of the Construction Industry by Summary of Industry Performance ( percent), 2001 13 |
| Rise in Prefabrication 14 |
| MARKET POSITION 15 |
| The UK 15 |
| Table 6: Construction Output at Current and Constant 1995 Prices and Gross Domestic Product at Market Prices (£m and percent), 1998-2002 15 |
| Table 7: Investment in Construction as a Proportion of Total Business Investment at Current Prices (£m and percent), 1998-2002 16 |
| Overseas 16 |
| 2. Market Size 17 |
| THE TOTAL MARKET 17 |
| Table 8: Output of the Construction Industry by Value at Current Prices (£m), 1998-2002 17 |
| Table 9: Output of the Construction Industry by Value at Constant 1995 Prices (£m), 1998-2002 18 |
| by MARKET SECTOR 18 |
| New Work 18 |
| Repair, Maintenance and Improvement 18 |
| Table 10: Output of the Construction Industry by Sector by Value at Current Prices (£m), 1998-2002 19 |
| Table 11: Output of the Construction Industry by Sector by Value at Constant 1995 Prices (£m), 1998-2002 20 |
| Contractors' Work in the Private and Public Sectors 20 |
| Table 12: Contractors' Output by Sector by Value at Current Prices (£m), 1998-2001 21 |
| The Housing Sector 21 |
| Table 13: Number of Housing Starts and Completions in Great Britain (000 dwellings), 1995/1996 to 2001/2002 22 |
| Non-Housing Sectors 23 |
| Infrastructure 23 |
| Table 14: Contractors' New Work Output Within the Infrastructure Sector by Type by Value at Current Prices (£m), 1998-2002 23 |
| Industrial 23 |
| Table 15: Contractors' New Work Output Within the Industrial Sector by Type by Value at Current Prices (£m), 1998-2002 24 |
| Private Commercial and Public Non-Housing 24 |
| Table 16: Contractors' New Work Output Within the Commercial and Public Non-Housing Sectors in Great Britain by Type by Value at Current Prices (£m), 1998-2002 25 |
| OVERSEAS TRADE 26 |
| Table 17: British Construction Work Overseas by Country and Value of Work Done at Current Prices (£m), 1998-2001 26 |
| Table 18: British Construction Work Overseas by Country and Value of New Contracts Obtained at Current Prices (£m), 1998-2001 27 |
| Table 19: British Construction Work Overseas by Country and Value of Work Outstanding at Current Prices (£m), 1998-2001 28 |
| 3. Industry Background 29 |
| RECENT HISTORY 29 |
| NUMBER OF COMPANIES 29 |
| General Construction Market 29 |
| Table 20: Number of UK VAT-Based Enterprises Engaged in Construction by Turnover (000 and percent), 1998-2002 30 |
| Ownership of Construction Firms 30 |
| Table 21: Number of VAT-Based Enterprises Engaged in the Construction Industry by Type (number and percent), 2000 and 2002 31 |
| Turnover of Construction Firms 31 |
| Table 22: Number of UK Construction Companies by Sector by Turnover Sizeband (£000), 2002 32 |
| EMPLOYMENT 34 |
| Table 23: Employment Within the Construction Industry of Great Britain (000 employed), October 1989-October 2002 34 |
| Table 24: Personnel Employed in the Construction Industry by Type of Employee (000), Fourth Quarter 2001 35 |
| Remuneration within the Construction Market 35 |
| Private Contractors 36 |
| Number of Private Contractor Firms within the Construction Market 36 |
| Table 25: Distribution of Employees in Firms of Private Contractors in Great Britain by Number of Firms (number and £m), Third Quarters 1998-2001 37 |
| Employment within Private Contractor Firms 37 |
| Table 26: Distribution of Employees in Firms of Private Contractors in Great Britain by Total Employment (000), Third Quarters 1998-2001 38 |
| Private Contractors by Trade 38 |
| REGIONAL VARIATIONS IN THE MARKETPLACE 39 |
| Table 27: Geographic Distribution of Private-Sector Contracting Firms in Great Britain by Region of Registration (number of firms), 2001 39 |
| HOW ROBUST IS THE MARKET? 40 |
| LEGISLATION 40 |
| KEY TRADE ASSOCIATIONS 41 |
| Builders' Merchant Federation 41 |
| The Building Services Research and Information Association 41 |
| The Construction Industry Training Board 41 |
| Euroconstruct 41 |
| The Federation of Master Builders 41 |
| Other 41 |
| 4. Competitor Analysis 42 |
| THE MARKETPLACE 42 |
| MARKET LEADERS 42 |
| Turnover 42 |
| Table 28: Industry Synopsis of the General Construction of Buildings and Civil Engineering Works, 2001/2002 43 |
| Table 29: Leading Building and Civil Engineering Companies by Turnover and Number of Employees (£000 and number), 2001/2002 44 |
| Construction of Domestic Buildings 44 |
| Table 30: Industry Synopsis of Construction of Domestic Buildings, 2001/2002 45 |
| Value of Contracts Awarded 45 |
| Table 31: Total Value of Contracts Awarded to Top Ten Contractors (£m), Year Ending February 2003 46 |
| Table 32: Top Ten Traditional Contracts by Sector by Value (£m), February 2003 47 |
| Individual Company Analysis 48 |
| Amec PLC 48 |
| Company Structure 48 |
| Current and Future Developments 48 |
| Financial Results 48 |
| Carillion PLC 49 |
| Company Structure 49 |
| Current and Future Developments 49 |
| Financial Results 49 |
| Balfour Beatty PLC 50 |
| Company Structure 50 |
| Current and Future Developments 50 |
| Financial Results 50 |
| Laing O'Rourke PLC 50 |
| Company Structure 50 |
| Current and Future Developments 50 |
| Financial Results 50 |
| Kier Group PLC 51 |
| Company Structure 51 |
| Current and Future Developments 51 |
| Financial Results 51 |
| Interserve PLC 51 |
| Company Structure 51 |
| Current and Future Developments 52 |
| Financial Results 52 |
| Taylor Woodrow PLC 52 |
| Company Structure 52 |
| Current and Future Developments 52 |
| Financial Results 52 |
| Morgan Sindall PLC 53 |
| Company Structure 53 |
| Current and Future Developments 53 |
| Financial Results 53 |
| Amey PLC 53 |
| Company Structure 53 |
| Current and Future Developments 53 |
| Financial Results 54 |
| Mowlem PLC 54 |
| Company Structure 54 |
| Current and Future Developments 54 |
| Financial Results 54 |
| OUTSIDE SUPPLIERS 54 |
| Aggregates Levy 55 |
| Sales of Building Materials 55 |
| Table 33: Builders' Merchants' Cumulative Sales ( percent change), Year Ending February 2003 56 |
| ADVERTISING AND PROMOTION 57 |
| Table 34: Main Media Advertising Expenditure by Housebuilders (£000), Year Ending December 2002 57 |
| EXHIBITIONS 58 |
| The UK 58 |
| Overseas 58 |
| 5. Strengths, Weaknesses, Opportunities and Threats 59 |
| STRENGTHS 59 |
| WEAKNESSES 59 |
| OPPORTUNITIES 59 |
| THREATS 60 |
| 6. Buying Behaviour 61 |
| CUSTOMER PROFILE 61 |
| Types of Project 61 |
| Housing Sector 61 |
| Home Ownership Increasing 62 |
| Table 35: Households by Tenure in England (number of owner occupied and percent), 1997/1998-2001/2002 62 |
| 7. Current Issues 63 |
| EMPLOYEE ISSUES 63 |
| Health and Safety 63 |
| Skills Shortages 63 |
| Retirement Age 63 |
| National Construction Week 63 |
| Construction Industry Scheme 64 |
| Working Time Directive 64 |
| INDUSTRY ISSUES 64 |
| VAT on Repair, Maintenance and Improvement 64 |
| Strategic Forum for Construction 64 |
| Sustainable Construction 65 |
| Quality Mark 65 |
| Legislative Changes 65 |
| Main Contractors Group 65 |
| Construction Opportunities in Iraq 65 |
| MARKET CONDITIONS 66 |
| Federation of Master Builders' Survey 66 |
| PRODUCT DEVELOPMENT ISSUES 66 |
| Prefabrication 66 |
| New Product Innovation 67 |
| 8. The Global Market 68 |
| LEADING INTERNATIONAL CONTRACTORS 68 |
| THE EUROPEAN CONSTRUCTION MARKET 68 |
| Table 36: Construction as a percentage of Gross Domestic Product by European Country ( percent), 2000 68 |
| Europe's Largest Contractors by Turnover in 2002 69 |
| PROSPECTS IN EUROPE 70 |
| Table 37: Forecast Annual percent Change in Construction Output Throughout Europe by Sector (Euroconstruct area and percent), 2002-2005 71 |
| LEADING CONTRACTORS in the us 72 |
| LEADING CONTRACTORS in asia 72 |
| 9. Forecasts 74 |
| introduction 74 |
| FORECASTS 2003 to 2005 74 |
| Table 38: Forecast Output of the Construction Industry by Sector by Value at Constant 1995 Prices (£m), 2003-2005 75 |
| New Orders by Sector 76 |
| Table 39: Value of New Orders Obtained by Contractors in Great Britain by Type of Work at Current Prices (£m), 1998-2002 and February 2003 76 |
| FUTURE TRENDS 77 |
| 10. Company Profiles 78 |
| Amec PLC 79 |
| Balfour Beatty Plc 81 |
| Carillion PLC 83 |
| Kier Group Plc 85 |
| Morgan Sindall Plc 87 |
| Mowlem Plc 89 |
| Skanska Construction Group LTd 91 |
| 11. Further Sources 93 |
| Associations 93 |
| Publications 94 |
| General Sources 95 |
| Bonnier Information Sources 95 |
| Government Publications 96 |
| Key Note's definition of building contracting includes the process of design, project management, site preparation, procurement of materials, erection of structures and final fitting out of the building, all within the context of the construction market. Raising finance for projects can also be a fundamental part of the role of a building contractor, along with the long-term management of these assets. |
| Building contractors undertake a diverse range of construction work. Total construction output in 2002 was valued at £83.59bn at current prices, representing an increase of 11.9 percent on output in 2001. Within this figure, the largest proportion of work was accounted for by new work activity, at 54.3 percent, with the remaining 45.7 percent made up by repair, maintenance and improvement. Private commercial and private housing are the largest areas of new work, at £14.97bn and £10.36bn respectively in 2002. Within repair, maintenance and improvement, the private sector predominates, especially private housing, which was itself responsible for output worth £12.76bn in 2002. |
| The industry is typified by a large number of small firms. Indeed, of the 168,123 private contracting firms registered in 2001, 94.6 percent had fewer than 13 employees and were responsible for 33 percent of all work done by private contracting firms in that year. |
| However, there are some larger contractors who also operate on an international scale, such as Amec PLC, with a turnover of £3.21bn in 2002. Nevertheless, this British contractor was still only ranked ninth among the top European contractors, with larger groups (such as Skanska of Sweden, Vinci and Bouygues of France and Hochtief of Germany) vastly exceeding this turnover. Nevertheless, in the context of overseas work, British construction companies were responsible for £4.6bn of construction activity in 2001, with a further £5bn of work outstanding in that year. Key markets were North America, which comprised 41.3 percent of all work done, EU countries and Hong Kong. |
| Since the production of the 1998 Egan report Rethinking Construction, the industry has become focused upon improving quality and service through benchmarking and continual assessment. At the same time, many larger contractors have repositioned themselves as service providers, now including areas such as facilities management and long-term asset management for the public sector. |
| Key Note predicts a healthy outlook for the public sector through to 2005, with the percentage growth rate outstripping the private sector. Growth in the total construction market is forecast to rise by 5.1 percent overall at constant 1995 prices compared to the 2002 figure (2005 over 2002 comparison). New work activity will rise at a faster rate than repair, maintenance and improvement. |
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