Should you appoint within or from the outside?

A thought has occurred to me following a discussion with a client – can you really find the right person to work for you?

In the last week there have been some changes at the top for large businesses – Laing O’Rourke and Persimmon. The first has seen their European commercial director and managing director of Canada exit and additions including a former financial director of a Yacht business and a former chief executive of an M&E specialist. These are two contrasting appointments – one from the sector and one not. You could look at this as odd but at the same time it brings a fresh perspective as building a building could be analysed as building a yacht – the main difference is surely the size. Persimmon has likewise gone for an appointment in the industry.

So what is the best option – insider or outsider? At the core of every job is a set of skills that should lead to success and by boiling these down you do find that certain industries are very similar, the main difference sometimes is the contacts and experience will make the job that little bit easier. But do we all really want an easy life? Working with two clients in recent times has seen appointments from outside the industry and the fresh pair of eyes on the business has highlighted areas where the strategy can be made stronger – surely this is a good thing?

You end up back at the skill base. I have frequently said that a construction or property business is unique to other industries, based simply on specific points that only tend to occur in the industry. But strip it back, you offer a service/product to a client which you pitch to them, hopefully win the work and then deliver (hopefully within budget). You then make some money. That could describe a retailer through to a property business.

It seems to me that the right person for the job is not always the most obvious person. If more businesses took a risk and broadened their search you may find a hidden gem. Go on be brave.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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Is construction pushing the economy higher

I read a statistic this week  that the construction industry is forecast to grow by as much as 23% by 2018 – a whopping £12bn contributed to the UK economy. But in stark contrast, the number of profit warnings for construction companies is on the increase – which point is right? Well I think they both are.
The Construction Products Association’s (“CPA”) autumn forecast, published in October 2014 highlights a number of areas for growth:

·         Road construction to increase due to Highways Agency’s capital funding increase;

·         Rail output growth for a couple of years before tailing off; and

·         Infrastructure spend to grow.

So here is the disconnect, we hear construction industry and assume a building yet the industry covers a wider array than just the latest office block. Take the M1, we’re all enduring 50 mph yet the people behind the ongoing work are in the construction industry.

I recently discussed the perfect storm in the property market, yet despite the scarcity of labour and materials it is now widely accepted that if you weather this storm the growth is yours to take. A bit like 2008, those businesses that survived the recession came out in a much better financial position – what’s another year or so.
The growth, as well as the points made by the CPA, comes from:

·         Garden cities: Appropriate sites are being identified and I expect post-election plans will be put in place for a significant number of developments, with the Lyons Review noting 500,000;
·         Planning permissions: Improvements to the system will allow for a quicker turnaround on future housing and development – this will bring forward a number of schemes; and
·         Affordable housing and other incentive schemes: A wider push to keep housing affordable or financing accessible will keep the market moving.

So I come back to the start. A number of profit warnings – this reflects those businesses unable to adapt quickly to changes in market conditions. This is not always their fault but a market that is new to all. To me 23% growth feels high and with so many variables it is difficult to see how it can be achieved but look at the potential for the future which clearly points towards growth in the sector.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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Moving on up….North

A lively debate last night at the local – the usual stuff, Yorkshire versus Manchester but outside the pub an alliance is being formed. With recovery under way and a number of proposals being tabled that will bolster the economic regeneration in Northern England – old rivalry is being shelved as we all simply climb into bed with each other for the benefit of the economy.

November saw the Government make a number of pledges to us Northerners; with George particularly highlighting his plans for a Northern Powerhouse (catchy!). Underpinning this will be HS3, a much improved rail network slashing journey times that not even HS2 can achieve. Oh and the best part is that HS3 arrives years (some may say light years) ahead of HS2. Sounds like a good investment to me.

Just look at the improvements in time. HS2 will knock 10 minutes off a journey to London while I’ll be in Manchester in just over 30 minutes (as opposed to the unknown at the moment).

Is all this a sympathy vote though? The North was hit hard during the recession and particularly the construction sector in the North East where the industry contracted by almost 40%, according to the Office of National Statistics.

Now it doesn’t bother me that Manchester are leading the charge, I love Manchester and think the city has such potential. A recent visit to Manchester just demonstrated how far it has come since I left University in 2005. Even my old building has been removed and replaced with a sparkly new one. Large investment and partnerships for residential, Spinningfields and the Cotton Building are all showing that construction is back on track here. But it’s not all about the mancunians.

Leeds, and to a lessor extent Sheffield, are also pushing ahead. The number of speculative buildings is increasing and as we sit in our offices we overlook the impressive Wellington Place that seems to be going up in record speed. In a recent interview Tom Riordan noted that over the coming years there will be companies that surprise us moving to Leeds. Exciting times. Just makes you want to smile.

So each city is moving in the right direction, by 2027 we should be better connected (you never know they may have finished the M1 by then!). I guess you have to request that the roads are invested in. The M62 is still a big thing in the North, and when it grinds to a halt it causes ramifications.

Having a grand vision is one thing, but delivering it is another. Osborne’s “Northern Powerhouse” has much in common with the “Northern Way” - former deputy prime minister John Prescott’s equally grand plan to, yes, improve east to west transport connections. While announced with great fanfare, this project yielded few tangible improvements. Let’s cross our fingers and hope then.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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The Perfect Storm (and no not the movie!)

I do like to be positive wherever I can so stay with me on this way as it starts pretty low.

Following a number of years of construction businesses surviving by any means the perfect storm has been created in the construction sector. During the recession a number of contracts were taken on at low margins – mainly to keep people busy and pay the bills. The problem now is costs are rising and until the better margin contracts come through the businesses are being squeezed. The evidence of this is in the market place with a number of contractors issuing profit warnings.

Another sad factor is that with a steep upturn in growth there is becoming an ever increasing shortage of resource across the board. These pressures on the supply chain are then resulting in increased prices – yet another whammy to the industry.

But why is there a shortage? Well if you take labour, this simply reflects that there was little investment during the recession in the skill. The old hands ticked over while new graduates sought employment anywhere they could. The increase in work now means that there is a lack of the skill base needed; however there is hope – people are doing the training, the degrees, the apprenticeships so be patient and look for the right people. A combination of good advertising and marketing and willing to invest in your employees will benefit you in the long run.

So where to next;

• Legacy contracts are what they are and they just need managing out. Businesses should seek variations though I completely accept this will be difficult.
• Increasing costs of a business are a short term threat until the improved margin contracts come through. The more I speak to bankers the more I realise they don’t like surprises. Be upfront with them, can’t guarantee it will count but if you don’t ask you don’t get and it may help you survive those tough months.
• Invest in people. This is a global message not just industry specific. We are a nation of dying trades yet construction is one we will always need.

The media message is of course taken to the extreme but the more businesses I chat to, the more you see the problems. Shortages and rising costs are here, we have to accept that but as the market settles and income hopefully takes a positive turn things should start to smooth out in late 2015.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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