Economic slowdown divides industry into haves and have-nots

Construction is splitting into a 'two tier' industry where contractors on framework deals are continuing to win decent margin work while those bidding on the open market are left to fight for scraps.

Contractors in the two camps are experiencing rapidly diverging fortunes as the downturn in housebuilding and commercial projects continues.

Peter Young, managing director of Kier Western, told CJ: "There are those contractors that are well-placed on public and private sector frameworks which are securing reasonable volumes through those arrangements.

"Then there are firms outside of that which are operating in a decreasing pool of open market tenders typified by very competitive bidding."

Contractors not already on framework deals or partnering arrangements are finding it virtually impossible to elbow their way into the market.

One housebuilding subcontractor said: "We've got to look at different markets now. But it is hard to extract work from the local authorities, particularly at this time, when their capital projects are probably under pressure anyway. They've got existing contractors, so you've got to get into a market which is already full of people jostling for position.

"The housebuilding industry has been buoyant and we've been under pressure to try to up our game and do more and more for our client base. So we've tried to concentrate on that and paid less heed to the local authority work."

Constructing Excellence chief executive Don Ward said the situation contractors were facing vindicated the actions of those firms that had embraced partnering.

He said: "Those companies that have tried to embrace the change deserve some sort of reward from it. And if that means they are going to have a more secure work rate in the next period, that would be a good benefit of all the effort that has gone on."