Construction: bidding for lasting value, delivering for success

You may have noticed on our social media channels that we’ve been promoting our new ‘Audit Insights’ thought leadership report on the UK construction sector – ‘Construction: bidding for lasting value, delivering for success'.

With large-scale construction failures such as Carillion and Grenfell occurring since our last report on the sector – and still fresh in the public conscience – we wanted to again review the health and sustainability of, and challenges for, this unique industry. We collaborated with auditors with many years of experience independently examining and auditing construction firms.

Shaky foundations

The construction sector is a key driver of growth for the UK economy – accounting for 6% of GDP and employing more than 2.4 million people – but it is also a fragile one, with low margins and high risk.

We’ve found that construction companies often compete to offer unsustainably low prices – in the expectation that a change in the project will improve their profit margin. However, unexpected changes can turn these small profits into losses and make it difficult to return a project to profitability.

If this practice continues, there is a risk that we will see further failures – which in turn can damage supply chains and the wider economy.

Cementing the future

Our report also warns that the sector must do more to embrace innovation and technology.

It must also work hard to attract and train a new and more diverse labour force with the right skill set, if it is to be fit for the future and improve productivity.

The industry needs to reach out to schools, colleges and universities to promote the opportunities available to young people – not just as construction workers, but also as planners, surveyors, architects and engineers.

Government also has a role to play, not least by ensuring the reliable flow of major infrastructure projects – operating to schedule and with appropriate strategic planning.

Key goals

We’ve built the report around four key goals for the industry that we believe deserve particular emphasis:

  • Bidding for lasting value – getting the price right at tendering stage, and avoiding potential future failures fuelled by unsustainably low prices;
  • Delivering for success – applying financial rigour to estimates and judgements throughout the project;
  • Rebuilding confidence through increased transparency – with executive management encouraging and supporting employees to report problems early; and
  • Getting fit for the future – investing in new technologies and driving operational efficiencies, with commitments from government.

For each goal, we make a series of recommendations as to how to achieve it – for contractors, clients, investors and government.

I hope that this report will offer useful insights for the industry and wider stakeholders – and help those responsible to overcome the challenges, become more profitable, reduce their risk and provide a more sustainable value to society.

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