The UK ground engineering sector faced notable revenue challenges amid the pandemic, but resilience was evident in profit retention.
- Seven out of the top ten engineering firms saw a revenue decline, with an average drop of 6%, attributed to a slowdown in high-rise residential projects.
- Despite a fall in liquidity, with reserves dropping from £47.6m to £39.9m, the sector displayed adaptability.
- Some firms, such as Van Elle and O’Keefe Construction, managed to contain losses, indicating a strategic response to financial pressures.
- New entrants like Cognition showed promise, while established firms navigated uncertainty in project inflows and rising costs.
During the pandemic, the UK’s leading ground engineering contractors experienced significant challenges, marked by a median revenue decline of 6% among seven of the top ten firms. This downturn was part of a continuing trend from 2019, exacerbated by the pandemic and Brexit, particularly affecting high-rise residential projects. Despite these challenges, the impact on profitability was less severe, with most companies limiting their losses.
Although five out of the top ten firms reported losses, these were modest, not exceeding £2 million each, a sharp contrast to Cementation Skanska’s significant dive the previous year. Liquidity was another concern, with combined cash reserves for the top ten firms decreasing to £39.9 million from £47.6 million. This was unexpected for businesses that had initially projected a steadier performance.
Peter O’Brien of O’Brien Contractors noted the delayed impact of the downturn, revealing that while early 2020 maintained a steady pace, from September, projects and inquiries dwindled, with many companies ceasing operations temporarily. Despite a turnover reduction from £27.5 million to £25.7 million, and a drop in pre-tax profits from £4 million to £2.8 million, the firm remains strategically focused on future growth.
Van Elle, maintaining its top position, limited its loss to £1.4 million, an improvement over the previous year’s £2.2 million deficit. O’Keefe Construction followed, enduring a £1.8 million loss, subsequent to a £1.5 million pre-tax profit, and entered a company voluntary arrangement to manage its debts, showcasing adaptive financial restructuring.
A notable development was Cognition’s entry into the top ten, experiencing a 15% revenue rise, the largest among its peers, alongside a £1.4 million increase in pre-tax profit. This signifies a strong performance in expanding from land remediation to broader groundworks, pointing towards a resilient business model amidst widespread uncertainty.
Enquiries for ground engineering services saw a tentative rise starting January 2021, although converting these enquiries to actual projects remains a slow process. The industry continues to grapple with workforce availability, material shortages, and inflation, impacting overall profitability despite strategic measures to mitigate long-term cost commitments.
The UK ground engineering sector demonstrates resilience and strategic adaptation in navigating pandemic-induced financial challenges.
