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Rising costs drive down contractors' profit margins

One in four UK civil engineering contractors are making a loss, according to new research from market analysts Plimsoll.

Many in the market are finding it difficult to pass on the pain of cost inflation to their customers as competitive pressure is restricting their pricing power, said Plimsoll.

Over the past two years the average profit margin of UK civil engineering contractors has fallen to 2%. 272 companies were found to be losing money with 99 of these doing so for the 2nd year running. 46% of companies saw their gross margin fall in the latest year.

But 401 companies managed to increase their profit margins over the same period. Overall, 728 companies managed to stay in the black despite rising costs.

Contractors with falling profit margins face a choice of whether to “protect their market share and continue to lose money, or adjust their prices to reflect their increased costs,” said Plimsoll lead analyst David Pattison. “Without refocusing on the bottom line, many of these companies will simply run out of cash.

“Unfortunately, many are reluctant to pass on price rises for fear of losing customers to cost savvy competitors. However, falling profit margins across the industry is the first warning sign that this strategy has become unsustainable”.

Readers' comments (1)

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