Double-dip recession undermines construction performance

The latest UK Construction Industry Key Performance Indicators (KPIs), published today, reveal the impact on the industry of the harsh market conditions endured over the last four years, with average profitability falling to a new low of 2.7%, in marked contrast to the 9.9% seen in 2009.  The KPIs are based upon data from thousands of construction projects completed during 2011 and are produced for the industry by Glenigan and Constructing Excellence with the support of BIS. 

Allan Wilen, economics director, Glenigan commented “The double-dip recession is leaving its mark on the industry. As workloads have fallen, margins have been squeezed and firms have shed labour. The latest Indicators suggest that this challenging economic environment is now undermining the industry’s efforts to deliver an improved product and service to clients.  The 2012 Key Performance Indicators have recorded retrenchment in a number of important areas, covering client satisfaction and the delivery of projects to time and to budget.

“More encouragingly, our analysis found higher levels of both client and contractor satisfaction on projects where KPIs had been used to monitor performance during the construction and design process. The difference was particularly marked for clients’ perception of service delivery, with 80% of clients giving a rating of 8 or more out of 10 on projects using KPIs, compared to 70% on non-KPI projects. This appears to demonstrate how using KPIs can improve the dialogue across the supply chain and hopefully help secure repeat business from clients.”

Don Ward, chief executive of Constructing Excellence, said: “Looking ahead, much of the sector will only emerge slowly from recession, and trading conditions will remain tough. Clients will continue to demand that firms demonstrate their ability to deliver projects on time and on budget, and will need to avoid the downward spiral of lowest price tendering, in which the winning price bears little relation to the likely outturn cost and safety, and meanwhile vital factors such as safety, quality, social responsibility and environmental criteria are compromised or ignored. The Construction Industry Key Performance Indicators provide clients and supply side firms alike with the basis for measuring performance across a wide range of quality and cost indicators, and help identify improvements that will help firms safeguard their competitive position and win work.”