Vigilance is at its most vital when the going’s good

Latest industry commentary from Carey London

London is a great world city. But, in construction in particular, we must remain vigilant to the risks lurking at every turn.

Right now times appear good and order books are full, but it’s precisely the time I’m most on guard.

Why?

Because this seemingly unstoppable market is starting to simmer with the perfect ingredients for another ‘correction’, taking out more capacity and leaving commercial casualties across the sector.

 

No one wants a reversal in the gains seen in the residential sector over the last 30 months.

It’s an astonishing success story: recent figures show construction adds a staggering £6bn a year to London’s economy.

Correction ingredients

But the vigilant recognise certain key factors.

This seemingly unstoppable market is starting to simmer with the perfect ingredients for another ‘correction’.

Just take a look: labour costs are rising; the lenders and lease companies are jostling in a queue of those willing to fund expansion, and the supply chain is becoming strained on costs and delivery times.

Add to this a disconnect between land and property value, particularly at the top end, where external distortions such as stamp duty are causing wild gyrations, and you have a row of flashing amber lights.

Then there’s the biggest risk of all for every specialist contractor: the number of eggs in the baskets you hold.

If you put them all together at the heart of your business and there’s a slip, it can get messy – quickly.

Forming Carey London four years ago came on the back of watching this potent mix of market forces and over-dependence on just one or two clients cause chaos elsewhere.

It was a critical lesson for me.

Right at the outset the focus for us has been to minimise our financial risk, no matter how readily facilities were made available to us.

Our continued re-investment of profits in the purchase of plant and equipment required for our projects rather than hiring has put us in good stead for the future.

It’s key to keep plenty of baskets each holding just one or two eggs, rather than one mega-client with the potential to hold you in a headlock or worse.

This ethos will remain during our continued and controlled expansion over the coming years.

As we are ‘owners’ rather than ‘hirers’, this also give us an added flexibility in dealing with any future ‘corrections’ in the market.

Baskets a-plenty

The next step holds the key for us as a company: making sure we keep plenty of baskets each holding just one or two eggs, rather than one mega-client with the potential to hold you in a headlock or worse.

We have worked to spread our client list over a relatively small number, reducing over-dependence on just one.

Beyond that, it’s vital to maintain our relationship with all our clients to secure repeat business.

There are a number of factors which have helped, including certainty in price and programme, and by working with all parties quickly and efficiently to resolve any problems that may occur.

It’s a formula that’s starting to pay off handsomely. But turnover alone does not build success.

It’s vital to maintain our relationship with all our clients to secure repeat business.

Our focus is to continue to deliver reinforced concrete frames and associated groundworks for clients who demand certainty in price and programme.

Success will grow alongside client confidence in your ability to deliver. And with that comes the recognition that you are creating value, built on sustainable margins.

It’s still early days for us, but I have learnt that these fundamentals are vital in building a strong base for the future, not dependent on lenders and certainly not over-reliant on one big customer.

We enjoy good relationships with many clients who share our understanding that markets are fickle: all those currently enjoying the fruits of London’s boom must retain the capability to cope with changed headwinds, which come when least expected.

Martin Carey is managing director of Carey London

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For commercial enquiries contact:

Dean Hockley, Director, E. dhockley@careylondonltd.co.uk Tel. 01727 814250

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