The figures for October are in, and investors in the construction industry will be smiling all day. ‘Tis the season for Q3 revenue reports, folks. And that means volatile markets, worries for the future, and tense shareholders. (You wouldn’t want to be a VW investor right now, that’s for sure). But, the construction industry will breathe a collective sigh of release. October’s figures weren’t just satisfactory; they were downright phenomenal. In a period when the Chinese economy is dragging us all down with it, concerns are high. Despite that, the building industry posted its highest earnings in a year for October end.
In fact, the figures were so pleasing, it actively pushed the dollar and the pound sterling to new strengths. But, the interesting statistic here is the self-employed rate. In actual fact, the large civil engineering firms ended the month on a low. It was the sheer volume of contract work that accounts for this growth. Does this signify a new model for the construction industry? Are the big firms grinding to a halt, while freelancers quickly take over the reigns. There’s something in the water, so we decided to dig deeper.
One thing that’s clear is that there’s more work than ever before. Job creation is at its fastest turnover in a year, and the market is moving forward again. There’s a certain safety and security in the building industry. It’s simple physics. As the population grows, we’ll continue to demand more housing and infrastructure. In particular, the major global cities are all in a huge period of growth. There are 263 skyscrapers currently in development in London alone. New York’s skyline will also look very different by 2018.
But that’s not the surprising factor in this news story. The big news is the growth of freelance work. Why exactly are these projects being awarded to smaller contractors, and niche companies? Quite simply, it’s all about flexibility, cost, and low risk. When using a civil engineering firm, the stakeholder puts the entire project in the hands of one company. In modern business terms, that’s inefficient, and enormously expensive.
Instead, stakeholders are turning to the smaller, niche freelancers, and specialist startups. They hire one team to manage the architecture, another to handle components and supplies. They hire trades individually, and have a project manager to bring the whole thing together. One company that has been in the construction game a long time is CCTY Bearing. They have also noticed a drastic change to modern project hiring. It’s more and more common for them to supply construction companies on a project-by-project basis.
These tactics also helps reduce the risk, especially in the crucial early stages. In the first few months, a project must come together quickly and efficiently. If not, it risks being ditched entirely. By hiring contractors, the stakeholders only hire what’s necessary right at the start. It’s a much more efficient way to save money in those important early moments.
For now, the headlines will please investors. Construction profits are up, and there are more jobs than ever before. But, take note that the industry is in a period of big change. Keep a watchful eye on those bigger civil engineering firms. Is a collapse on the horizon?