The Construction Company in and out of Recession

196 Pages·1995·16.759 MB·English

by  Patricia M. Hillebrandt, Jacqueline Cannon, Peter Lansley (auth.)

THE CONSTRUCTION COMPANY IN AND OUT OF RECESSION
Also by Patricia M. Hillebrandt and Jacqueline Cannon
THE MANAGEMENT OF CONSTRUCTION FIRMS: Aspects of
Theory (editors)
THE MODERN CONSTRUCTION FIRM
Also by Patricia M. Hillebrandt
ANALYSIS OF THE BRITISH CONSTRUCTION INDUSTRY
ECONOMIC THEORY AND THE CONSTRUCTION INDUSTRY
The Construction
CODlpany in and out
of Recession
Patricia M. Hillebrandt
Construction Industry Consultant
Senior Visiting Research Fellow, University of Reading
Jacqueline Cannon
Managing Director
Construction Forecasting and Research Ltd
and
Peter Lansley
Professor of Construction Management
University of Reading
Foreword by N.I. Simms
Group Chief Executive of Tarmac pic
A report on a study sponsored by the
Engineering and Physical Science Research Council
© Patricia M. Hillebrandt, Jacqueline Cannon and Peter Lansley 1995
Foreword © N. I. Simms 1995
All rights reserved. No reproduction, copy or transmission of
this publication may be made without written permission.
No paragraph of this publication may be reproduced, copied or
transmitted save with written permission or in accordance with
the provisions of the Copyright, Designs and Patents Act 1988,
or under the terms of any licence permitting limited copying
issued by the Copyright Licensing Agency, 90 Tottenham Court
Road, London WI P 9HE.
Any person who does any unauthorised act in relation to this
publication may be liable to criminal prosecution and civil
claims for damages.
First published 1995 by
MACMILLAN PRESS LTD
Houndmills, Basingstoke, Hampshire RG21 6XS
and London
Companies and representatives
throughout the world
ISBN 978-0-333-61771-7 ISBN 978-1-349-24195-8 (eBook)
DOI 10.1007/978-1-349-24195-8
A catalogue record for this book is available
from the British Library.
10 9 8 7 6 5 4 3 2 I
04 03 02 01 00 99 98 97 96 95
To our children:
Adrian, Alison, Carolyn, Imogen, John,
Joy, Robert and Robin
Contents
List of Figures xi
List of Tables xiii
Foreword xv
Acknowledgements xvii
Abbreviations and Acronyms xix
Introduction xxi
PART} THE INDUSTRY
1 The Construction Industry and its Environment 3
1.1 Introduction 3
1.2 M,ajor influences 6
1.3 Boom to recession in the economy and in the
construction industry II
1.3.1 Private housing 14
1.3.2 Commercial construction 17
1.3.3 Public building 20
1.3.4 Infrastructure 21
1.4 Conclusion 23
2 Financial Aspects of Large Construction Companies 25
2.1 Introduction 25
2.2 Companies' balance sheets 25
2.3 Turnover and profits 30
PART II THE CONTRACTORS AND THEIR STRATEGIES
3 Financial Considerations 37
3.1 Introduction 37
3.2 Capital 37
3.3 Profits 46
3.4 Dividends 49
3.5 Share values 50
vii
Vlll Contents
3.6 Cash flow 52
3.6.1 Contracting 52
3.6.2 Housing 54
3.6.3 Property 55
3.6.4 Mining and minerals 56
3.7 Bonding and credit 57
3.8 Financial control within companies 58
3.9 External influences 59
4 Markets and Marketing 63
4.1 Introduction 63
4.2 Retreat to core businesses 63
4.3 Contracting 65
4.4 Housing development 66
4.5 Commercial property development 68
4.6 Mining and minerals 69
4.7 International businesses 69
4.8 Marketing policy 73
5 Marketing Contracting Services 77
5.1 Introduction 77
5.2 Response of companies to recession 77
5.3 Extension of existing services 78
5.3.1 Developing regional penetration 78
5.3.2 Expanding work abroad 80
5.3.3 Taking over contracts from companies in
receivership 80
5.3.4 Improvement of quality 82
5.4 New services and new ways of supplying existing
services 82
5.4.1 Design and build and other non-traditional
contracts 82
5.4.2 Provision of finance and financial packages 85
5.4.3 New forms of diversification and
specialisation 88
5.4.4 Links with other contractors 91
6 Structure, Management Methods and Planning 93
6.1 Introduction 93
Contents ix
6.2 Structure 93
6.2.1 Type of company 93
6.2.2 Structure and management within the
company 95
6.3 Corporate planning 102
6.3.1 Planning from the 1970s 102
6.3.2 The present position 103
6.3.3 Implementation of the plans 106
7 The Management Resource 109
7.1 Introduction 109
7.2 Problems of staff shrinkage and cost cutting 110
7.3 Change in construction employment patterns 112
7.4 Graduate recruitment and management training 115
7.5 Developing managers for the future 117
8 Review of the Survey 121
8.1 Introduction 121
8.2 Changes in strategy 1986-1993 121
8.2.1 Key developments in strategy 121
8.2.2 Corporate objectives 123
8.2.3 Financial policy 128
8.2.4 Markets and marketing 129
8.2.5 Structure, organisation and management 130
8.3 Leaner and fitter or thinner and weaker? 132
PART III PRACTICAL AND THEORETICAL
IMPLICATIONS
9 Contractors' Concerns for the Future of the Industry 139
9.1 Overcapacity 139
9.2 Operative employment 141
9.3 Policy and regulatory framework 143
10 Towards the Redevelopment of Theory 147
10.1 Introduction 147
10.2 Strategy 148
10.3 Market portfolios 150
10.4 Corporate planning 156
x Contents
10.5 Diversification 159
10.6 International contracting 161
10.7 Financial strategy 162
10.8 Pricing policy 163
10.9 Internal and external markets 163
10.10 Management and organisation structure 165
10.11 Effect of recession on innovation 168
10.12 Conclusion 169
Appendix 1: Changes in Accounting Rules; Exceptional
Items; Extraordinary Items 173
Appendix 2: Location 0/ Discussion o/Topics in the
Three Books; Contents o/Companion Volume,
'The Management 0/ Construction Firms:
Aspects o/Theory'; Contents o/Companion Volume,
'The Modern Construction Firm' 175
Subject Index 177
Index 0/ Names 183