The UK’s contractors are diversifying into new areas and growing their positions to compensate for a lull in workload in other sectors.
Contractors are also taking on larger value contracts as they emerge from the pandemic according to exclusive construction information research from Glenigan covering the 12 months to Q1 2022.
Morgan Sindall remains the UK’s top contractor and the firm’s order book has grown by 53% over the past 12 months as the group has taken on bigger jobs and shifted its sector focus.
There has been a 59% drop in the value of main contracts awarded for civil engineering work at Morgan Sindall. The group’s education order book is also down a quarter, but Morgan Sindall has successfully diversified by growing in other sectors.
Morgan Sindall’s workload from private residential work ballooned by 159% in the 12 months to Q1 2022. Major private residential schemes secured by Morgan Sindall in the last year include a £160 million development of 261 flats and 112 houses at Girton near Cambridge for joint clients, the University of Cambridge and developer Present Made Eddington (Project ID: 21420922).
The group is also working on the £107.3 million first phase of the Manor Road Quarter to provide 355 homes in Newham, east London, for a consortium of clients including Homes England, Legal & General and the English Cities Fund (Project ID: 20399119).
As work in other sectors waned, the biggest increase in Morgan Sindall’s order book has been in social housing, where orders leapt by 193% to £714 million. This growth was achieved by taking on larger jobs.
In the most recent period, the average social housing contract won by Morgan Sindall was valued by Glenigan at £31.0 million compared to £12.2 million in the previous 12 months. Major social housing contracts won by Morgan Sindall include a £320 million maintenance deal for Moat Housing (Project ID: 21200850).
Growth areas for medium-sized contractors
The continued strength of opportunities in the industrial sector has provided an opportunity for medium-sized contractors to diversify their order books.
Glenigan economics director Allan Wilén comments: “The warehousing and logistics sub-sector has been the strongest performing sector since 2018. Structural changes in the retail sector, accelerated by the pandemic, has rapidly increased demand for logistics space.”
Contractors taking advantage of this increased demand have been able to expand smaller market positions through taking on larger value schemes.
Glencar just edged into Glenigan’s rankings of the top 10 industrial contractors for the 12 months to Q1 2021, when the company’s biggest scheme was a £16.5 million scheme to build two warehouses at Bletchley (Project ID: 19357932).
In the most recent year, Glencar’s industrial order book has more than doubled to nearly £300 million and so has the size of the average contract the group has won to £12.4 million.
Major industrial schemes taken on by Glencar include the £34 million Cross Point Business Park Development in Coventry for Bericote (Project ID: 21372896) and the £33.6 million Kingston Park South warehouse scheme in Peterborough for Firethorn Trust (Project ID: 21074479).
Glencar is also looking to diversify further. “We have identified other growing sectors and will seek to expand into these, taking advantage of the opportunities available,” said Glencar managing director Eddie McGillycuddy on announcing the group’s results recently.
Bromsgrove-based Benniman is also growing on the back of diversifying further into the industrial sector. The value of the firm’s order book has quadrupled in the past year to £199 million. Again, the group has taken on bigger jobs and the value of the average contract award has doubled to £16.6 million. Large jobs in this sector won by Benniman include the £49.2 million second phase of the Vale Industrial Park for Chase Commercial (Project ID: 20485966) and a £32.2 million unit at the Prologis Park in Wellingborough (Project ID: 20269857).
The medical & scientific sector has also provided opportunities for medium-sized contractors to diversify and expand.
SDC did not feature amongst the top 20 contractors in this sector 12 months ago but a year on and the group has amassed a £78 million order book. SDC’s biggest job is the £65 million second phase of a biomedical campus in Cambridge (Project ID: 20388483).
Darwin Group has broken into the top 10 contractors after its order book for medical & scientific projects leapt 69% to £66 million in the 12 months to Q1 2022. Work won by Darwin includes a £20 million extension to Nottingham University Hospital (Project ID: 21519630) and a £15 million high dependency unit at Airedale General Hospital in Keighley, West Yorkshire (Project ID: 21396731).
Barnes Construction has moved into the top 20 contractors after building up a £32 million order book including an £11.5 million extension to Ipswich Hospital (Project ID: 19280937).
“The outlook for the health sector remains bright,” adds Mr Wilén. “We expect project starts to increase in 2022 and in 2023 as new projects come forward and as NHS trusts develop and implement their investment programmes.”
Education is the other area of major government investment in building work and a dearth of large value projects has helped medium-sized contractors.
For the second year in a row, Morgan Sindall has won more education work than any other contractor, but its order book is down by a third. McLaughlin & Harvey’s education order book has also more than halved.
Medium-sized regional contractors are successfully taking advantage. Kent-based Neilcott Construction enters the latest top 20 after building up a portfolio of education work including an £18 million extension to Harrow School (Project ID: 20440789) and a £10.5 million extension of Abbey Court Special Educational Needs School in Rochester (Project ID: 21077566).
Welsh contractor C Wynne & Sons has also moved into the education top 20 with a £45 million order book, including a £9 million new primary school at Bryn Meurig in Llangefni (Project ID: 18448511).
New entrants, new methods
In sectors where funding is mainly derived from the private sector, there is a less steady flow of jobs, but in areas such as the hotel & leisure sector, companies are able to diversify and establish a foothold.
DE Contracting had been working on residential and retail work according to Glenigan’s market intelligence but has entered the top 20 ranking of hotel & leisure contractors over the past year with a £68 million order book. This includes the £58.3 million One Berkeley Street hotel scheme in Westminster for Crosstree Real Estate (Project ID: 18409894).
Modern methods of construction (MMC) is also allowing new entrants to diversify into the hotel sector, in particular contractors with experience on modular building.
MY Construction was only set-up in 2005 and worked on retail and residential work but has used MMC and offsite fabrication to diversify into the hotel sector. Over the past year, the group has won £58 million-worth of work in this sector including a £42 million hotel at Manchester Airport (Project ID: 20059932).
Another recent entrant to the hotel sector is Elements Europe, which in April 2022 won a £100 million contract to build the world’s tallest modular hotel of 23 storeys at East Road in Shoreditch, north London (Project ID: 19413360).
The Covid-19 pandemic has had a significant impact on the retail sector with shoppers turning online. The available work is increasingly being picked up by middle-ranking contractors, such as Knight Harwood.
A year ago, the London-based contractor did not even feature in the retail top 20 but has since amassed an order book of £54 million in the sector to take top spot.
Knight Harwood’s retail work is focused on the capital and includes projects such as a £30 million redevelopment of the Arding & Hobbs department store in Clapham (Project ID: 20365382), and a £15 million shop alterations job at 20 Thayer Street in Westminster (Project ID: 20420015).
Bradford-based Stainforth’s retail order book has swelled as others have suffered by winning jobs including a £12 million supermarket in Macclesfield for Cedar Investments (Project ID: 16030733)
Another contractor that has found a focus on retail sector lucrative is Maidstone-based UC Build. The company was only set up seven years ago and is now amongst the 20 most successful contractors in the retail sector with a focus on smaller schemes in its region.
Step change for contractors
In the civil engineering and office sectors, a handful of large projects are allowing major players to dominate.
In the civils sector, specialist contractors are breaking in such as Hitachi Zosen Inova, Mytilineos and Jan De Nul by taking on major schemes in the power and marine sectors.
In other sectors, a dearth of large projects is providing opportunities for medium sized contractors to diversify and gain market share. Glenigan’s research suggests that to do so involves a step-up and to also take on larger jobs that the national players may have eschewed or that clients prefer to be handled by more local players.
Opportunities to diversify appear to be arising in sectors where there are fewer large projects as the construction industry reshapes in the post-pandemic world.