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KPMG warns of construction industry's "shrinking profit margins"

Auditor KPMG’s construction barometer survey has shown sustained shrinking of profit margins in the UK’s biggest 14 contractors since 2010.

The auditor’s analysis showed that from 2007 to 2010 there was a rise in construction margins that offset the shrinking margins in other areas. But this could be due to the cost of construction falling faster than revenues.

Since 2010 there has been a scramble in the industry to stem the collapse of forward order books, underpinned by deliberate profit-sacrifice. This has resulted in a steady fall in the average construction margin, with early indications being that 2012 results are not likely to buck this trend, according to KPMG.

“Just a quick look at the development of margins in the last two years confirms the urgent need for further cost efficient and restructuring across the industry,” said KPMG’s head of infrastructure, building and construction Richard Threlfall.

“Unless action is taken now the thin margins of 2007 will seem generous compared to what the industry may be facing.”

KPMG says HS2 could boost economy by £29bn

Richard Threlfall has this week said HS2 could boost the UK’s annual economic output by between £17-29bn in 2040.

Speaking after the announcement of phase two of the proposed high speed rail line, Threlfall praised the project as a “bold statement by the Government if its intention to redress the UK’s power balance”.

“Additional annual economic impacts on this scale could increase annual tax receipts by between £6bn and £10bn in real terms by 2040,” said Threlfall.

“Our work suggests high speed rail offers a good return to the treasury and to the taxpayer and is a cost effective approach to securing future national prosperity.”

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