Construction companies remain cautious over future growth

UK construction businesses remain relatively guarded about their long-term growth prospects, according to research from Santander Corporate Banking.

Directors of companies with annual revenues of up to £20m are expecting, on average, to increase their turnover by an average of 74% in the next five years, compared with the national average of 104%. Only the retail sector appears less optimistic about the future, predicting an average turnover of 52% in the same period.

In the short-term, construction companies are firmly focused on survival with the active pursuit of growth taking a back seat. Half (52%) of all directors say that survival is their immediate key priority, compared with 30% claiming they are focusing on organic growth.

The tough trading environment is seen to represent the biggest challenge to construction companies’ growth prospects, cited by just over half (53%) of businesses. Hiring and retaining quality staff also remains a key obstacle in the construction industry, according to one in five (20%) directors. Yet with many businesses still heavily focused on reducing company costs as a major priority (37% compared to 29% nationally), such an issue is unlikely to resolved in this sector any time soon.

Steve Pateman, head of Santander corporate and business banking, said: “Many businesses are clearly remaining cautious in the current tough trading environment but it’s encouraging to see that in the longer-term they are more positive about their prospects.

“The country is reliant on these businesses to drive the economic recovery and it bodes well that they are confident in their growth potential. At Santander, we are committed to supporting ambitious companies break through the challenges and barriers they face, helping them to fulfil their growth ambitions.”

Manufacturers are most optimistic about their prospects, expecting to grow by an average of 138% in the next five years. Financial services (108%), wholesalers (85%) and construction companies (74%) follow, while retailers remain relatively cautious expecting to grow by 52% over the period.

Smaller companies are most optimistic about their growth prospects with the average company with a turnover of less than £500,000 expecting to grow their business three-fold (by 202%) over the next five years. However, larger companies also have ambitious expansion plans, with businesses turning over between £5million and £20million expecting to grow by an average of 86%.

Businesses in Scotland and Northern Ireland are most optimistic about their growth prospects over the next five years, expecting to grow by 194% on average. Businesses in the South East (136%) and South Wales and the South West (123%) also show strong levels of optimism. However, businesses in the North West, West Midlands and North Wales are less optimistic, expecting to grow by around 50% over the same period.