Grant Thornton’s Solent 250 Sector Watch


Opportunities open up in property and construction


While the building project development industry has faced challenges in recent years it has still generated a revenue of £15.5 billion and a number of firms within the region are still making it onto the Solent 250 list – proving the sector’s resilience.


The number of successful building and construction companies making the list can perhaps be attributed to the high concentration of building project development activity in the region. The south east which includes the Solent region is home to 15.4% of the UK’s activity in this area – coming second only to London.


Nationally, the industry’s performance has deteriorated sharply in recent years, with the collapse in building investment, escalation in public and private debt and tight liquidity conditions forming just a few of the major factors. Around 10,000 firms have exited the industry over the past five years and, looking forward, revenue within the sector is projected to fall by an average of 1.8% per annum over the 10 years through 2016-17.


However industry revenue is forecast to remain stable in the coming year and record moderate growth by 1.9% to reach £13.75b in 2013-14, with industry employment growing to total 70,750 people in 30,500 companies.


Ones to watch


So how are property and construction companies in the Solent 250 dealing with these current challenges and opportunities?


Dyer & Butler


As well as undertaking commercial and industrial construction, Southampton-based Dyer & Butler specialises in providing civil engineering and construction services to the railway and airport industry. This diversity of activity and with clients in both the public and private sectors the company boasts a healthy order book in-excess of £70 million.


Churchill Retirement Group


Formed in 1994, Churchill Retirement Group is a privately-owned, family-run company


THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – FEBRUARY 2012


Competitive conditions are expected to remain intense over the short term as the commercial property market gradually emerges from the deep recessionary trough. But there are opportunities for building and construction firms in the Solent region throughout 2012 and we look at some of the key factors.


Opportunities for companies of all sizes


There will be opportunities for both small and large companies within the sector throughout 2012. The current upswing of investment into the housing market will create work for many of the smaller players, while the predicted rebound of 6% for office construction over the next two years will provide an important source of expansion for larger developers.


Manufacturing and business services


The south east’s large financial and business services sector could lead to a demand regionally for more office accommodation as the economy improves, creating opportunities for small and large scale building projects. Similarly, the area’s manufacturing industry could see a rise in requirement for new industrial facilities.


specialising exclusively in the development of purpose- built apartments for those in retirement. Despite difficult trading conditions and a weak housing market the group has positioned itself in a strong position with a turnover of £34m and employing over 100 staff.


Trant Construction


Trant is a privately held, multi- disciplinary contractor undertaking a diverse range of projects in the construction, petrochemical, pharmaceutical, utilities and transport sectors. With a targeted turnover of £100m and employing almost 800 people, the company’s projects range from commercial and industrial building, turn-key water treatment plants, power generation plants to airports and docks.


Investment


The level of property development in the non-residential building market will be supported by the return of spending on health and educational building projects, facilitated mainly through private financial initiatives (PFIs), where public buildings such as hospitals and schools are constructed and managed by private firms and leased to public agencies or the Government. The larger project development firms will be instrumental in facilitating these PFIs and may take a long-term equity interest in the projects.


Profit recovery


Project developers will find that competitive conditions remain intense over the short term but the gradual strengthening of demand conditions towards the middle of the period will support some widening of profit margins. Industry gross operating surplus will recover to grow by 6.0% per annum over the five years through 2016- 17, climbing to 32% share of revenue, up from the cyclical trough at 28% in 2011-12.


Statistics courtesy of IBIS World


For more information on the


property and construction sectors in this region and throughout the UK, contact:


Kerry McKeown 023-8038-1100 kerry.r.mckeown@uk.gt.com www.grantthornton.co.uk


www.businessmag.co.uk


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