Construction firms face challenges as Chinese buy up

Leone Hill

Unemployment fallen by half in last five years, figures show

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FALLING profits, foreign takeovers and a ‘glut of insolvencies’ are threatening the future of the construction industry, warns an expert.

Professor Ian Reeves, who is a senior partner at corporate development consultants Synaps Partners, gave the warning at a meeting of south coast construction leaders in Southampton.

Prof Reeves said the British construction industry was facing upheaval as more firms were being squeezed out by financial pressures.

He said: ‘In 12 to 15 months we will see a glut of insolvencies as firms can’t pay their bills on time.

‘Margins are low, cash flow is a crucial issue going forward and I can envisage more companies in distress, administration and more consolidation such as mergers and takeovers.’

Prof Reeves said the UK faced increased investment from abroad, and he said he expected Chinese firms to join the American, Japanese and European companies already buying into the British construction business.

He said: ‘We are facing dramatic changes in the construction industry.

‘The UK is becoming the “aircraft carrier” for the rest of the world because of the time zone, language, English law and the talent available.’

But Prof Reeves said it was not all bad news, as 40 per cent of building work in this country was still initiated by central government or councils.

Prof Reeves said that the industry was facing a shortage of materials and skilled labour and a new approach to construction was needed.

He predicted that ‘build off site’ construction techniques, where buildings were manufactured elsewhere and assembled on site, would become increasingly adopted to meet the technical challenges.

David Blenkarn from Hampshire-based finance firm Smith and Williamson said: ‘The construction sector is facing a number of challenges, including a lack of skilled labour, the introduction of new construction techniques and the effective management of cash flow.’