While subbies, contractors and architects are all reporting rising workloads, the pressure is still on for those at the back end of the supply chain
It鈥檚 difficult to avoid thinking of ground engineer Keller and electrical contractor T Clarke as the front and back end of construction鈥檚 pantomime horse: one鈥檚 going in one direction before the other gets a chance to catch up. Both issued interim management statements today showing stark contrasts in outlook.
Keller, which digs down, props up and prevents leakage of construction projects from the ground downwards signalled a likely 鈥渂eat鈥� to analysts鈥� forecasts for the year to December; 鈥淭ommy鈥� Clarke, which wires up buildings when they are nearing completion said trading was 鈥渋n line鈥� but issued the current war cry of probably every subcontractor in the land, 鈥渢he b*s aren鈥檛 paying us on time鈥� (naturally, in language more befitting a stock market announcement).
By about lunchtime Keller鈥檚 share price was up precisely 4.48%, while T Clarke鈥檚 was down 鈥� precisely 4.48%.
Before other UK practitioners along the construction chain get too excited about Keller unearthing green shoots along with everything else it digs up, the British-based group actually does very little in (or under) these shores and most of its improvements in order intake and margins have been down to self-help rather than benign markets.
There鈥檚 the rub for companies later in the cycle and further down the pecking order such as Tommy Clarke鈥� Even the better payers have to preserve their cash
But two other announcements today suggest grounds for optimism on a macro level. The RIBA鈥檚 Future Trends survey showed architects (who presumably hold the reins of the pantomime horse) reporting that the three months to October showed the first annual increase in workloads since the financial crisis. Workloads for the quarter were up 11% on the same period in 2012.
Meanwhile, hybrid housebuilder-contractor Galliford Try, which represents just about everybody in the middle of - let鈥檚 now call it - the construction conga, saw an 鈥渆ncouraging start鈥� to the year to June for both businesses. No surprises from its housebuilding side, given the degree of support lavished on the industry from HM Treasury, but even the construction division had seen a 9% increase in orders, an improving pipeline of opportunities and 鈥渕argin protection鈥�.
The division also achieved 鈥渃ontinuing strong cash management鈥� and there鈥檚 the rub for companies later in the cycle and further down the pecking order. Such as Tommy Clarke. Now I have first hand evidence that Galliford Try is among the better eggs within the realm of main contractors in terms of payment (other names regularly make the industry鈥檚 anecdotal black book). But even the better payers have to preserve their cash and, with material and labour costs bounding back across the industry, smaller companies, those naturally later in the cycle or further down the supply chain may find themselves on the wrong end of disputes for many months to come.
Alastair Stewart is a construction analyst at Progressive Research. Follow Alastair Stewart on Twitter or on
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