Time to reward those very special specialists

07 January 2019

At the end of 2018, Construction News published its Specialists Index: a list of the UK’s biggest specialist contractors working across concrete, demolition, building envelope, ground engineering, M&E, scaffolding and steel. The list provides an insight into how the different disciplines are faring in, what is fair to say, difficult trading conditions. It also provides a view as to how specialist contractors are changing their business model to become more profitable and business resilient.
The last 12 to 18 months have been turbulent. The collapse of Carillion took everyone by surprise, Brexit is causing continued uncertainty and the Hackitt enquiry has put the entire industry under scrutiny. However, according to the Specialists Index, many specialists are flourishing.

Following an industry wide dip in mid-2017, as jittery clients put the brakes on projects following the announcement of Brexit, the industry has steadily grown. With the collapse of leading envelope contractor Lakesmere in October 2017, it would appear that many specialists took the imitative to review their business and start to look at how they can plan for the future.

The result is that margins with the specialist are looking healthy and order books are positive. But how has this been achieved? According to the Index, many specialist contractors have become more specialist. Mike Walsh of Swift Brickwork commented to CN that they have invested in design and support capabilities to better understand the risk and requirements of a project, making them even more valuable to a client and also tier one contractors on design and build projects.

Risk is something that isn’t going away and it is refreshing to see the growing number of leading specialist contractors who are working hard to better understand risk and mitigate against it. This is often through employing designers, engineers and support staff as well as selecting suppliers, such as VJ Technology, who understand their business and can add value.

So, with specialist contractors becoming more specialist and risk aware and being able to provide wider services to aid the delivery of major projects, where does that leave the tier one contractors?

One growing trend is the removal of tier one contractors for a more construction management-based approach. With many tier one contractors surviving on single digit profit percentages this makes sense. One or two poorly performing projects and the contactor is under considerable pressure. By having a construction management approach with subcontractors working directly for the client, it takes away an element of risk. You could also argue that a more transparent approach with subcontractors directly reporting to the client could see a more joined-up approach to delivering buildings – something that Dame Judith Hackitt has referenced in her final report following her Independent Reviewof Building Regulations and Fire Safety.

Personally, I don’t see a move away from tier one contracting. The major contractors have skills, resources and expertise that are very much in demand. That said I can see more and more specialist projects or packages of works being handled directly by specialist subcontractors and this makes sense – you are reducing risk and employing someone who has the precise skills.

As a company providing technical products and solutions across many specialists, in particular ground engineering, demolition and the building envelope, VJ Technology has witnessed first hand the rise of the leading specialist contractors. As projects become more complex, their role will become increasingly important, but don’t start to dismiss the tier one contractors – there is an important role for everyone.