I think next year will as difficult if not more than this year. Unless you’re filling your order books with big high-profile infrastructure projects or jobs such as HS2, then you’ll find it difficult.
We’ve seen a number of smaller companies go under this year, I think we’ll continue to see this in 2017. If you’re a £50m turnover contractor, you’re not going to be able to bid for the large infrastructure projects you need to. They’re operating in the building market, rather than the infrastructure market where they need to be.
As for mergers next year, history shows that the best time to buy assets is sometimes from the receiver, rather than a takeover or buying before this stage.
2017 will be a year of feast and famine for the construction industry. Infrastructure contractors will be getting fatter as HS2 and a further raft of road schemes get underway; commercial contractors will be going on a diet as corporate demand plays the Brexit Blues.
But an industry divided by demand will be united by the common challenge of rising materials prices, already responding to the fall in the value of sterling; ongoing skills shortages; and the opportunity to gain commercial advantage by embracing technology.
The construction industry heads into 2017 at a crossroads. On the one hand we are still waiting to see what impact Brexit will have, if any, on the economy. On the other hand we are witnessing from the Autumn Statement a government that values both long-term, strategic projects such as Heathrow and Hinkley as well as quicker wins in local highways to pick up any potential slack.
At a corporate level this uncertainty may result in a stalling in sector consolidation. However, a fall in the pound will have its consequences: firms are going to be more attractive to foreign buyers, and so are UK projects that require outside investment.
2017 will continue to be a challenging year for the industry in the wake of Brexit. Donald Trump’s election in the US could add further uncertainty in 2017.
The central London commercial and investment sector continues to suffer due to post-Brexit loss of confidence. Foreign investment in central London is also wavering as the pound remains weak against the euro and the risk of the UK’s removal from the single market could potentially put off overseas long-term investment in UK construction projects.
The key word for construction companies is going to be flexibility, with contractors needing to adjust to market demands as and when they arise.
There is a strong chance that US investors will fuel a large amount of construction at the lower-to-mid end of project values, particularly when it comes to commercial property refurbishment.
As contractors we will need to demonstrate the ability to engineer value out of projects, especially on contracts which are already out to tender.