With signs of economic improvement on the horizon, around 50 per cent of the engineering and construction companies are still facing difficulties in finding credit to keep the wheels of their businesses moving, according to findings of KPMG survey.
The survey released on Monday stated that engineering and construction companies are looking at ways of funding their geographic expansion and new offerings.
“Credit is still tight with 47 percent saying that financing is still very difficult to obtain. Many respondents, mostly those outside the US, consider public-private partnerships (PPPs) to be a good bet for the industry if there is government backing,” it added.
Bahrain-based KPMG partner and head of building, construction and real estate, Middle East and South Asia, Ernst Weber, said that engineering and construction companies that are making major improvements to their businesses would provide a strong foundation for future growth.
“The future is far from certain but continuing to invest in risk management, expanding into new areas and building a skilled staff are critical steps that can help weather any change,” said Weber.
The KPMG 2010 Global Construction Survey, titled ‘adapting to an uncertain environment’ polled 140 senior leaders of major global engineering and construction companies in 25 countries to gauge their views on their business outlook for the sector. Forty-six percent of the respondents were based in the Europe, Middle East and Africa, 30 percent from Asia Pacific, and 24 percent from the Americas.
Margins have taken a cut over the last year, as most respondents said they had to reduce prices. However, the impact has been lessened due to cost-cutting measures. Looking ahead, more than 30 percent said they are bidding on new projects with lower margins but that factor is offset by the sentiment that backlogs are predicted to rise dramatically.
Close to half of respondents have forecast rising backlogs in 2011 that would come from pent-up demand; expansion into new services, such as power; or moving into additional geographies, such as the Middle East, Asia, Australia, Africa and India. Asia Pacific demonstrated the most promising outlook in backlogs in 2011 with 21 percent of respondents confident of a significant increase.
Other findings include indications that few companies expect to lay off workers in 2011, while 31 percent said they will likely hire more direct labour in that period.
Findings from a recent global construction industry survey indicate that the lingering economic downturn and associated constraints have generated a growing movement among global engineering and construction companies to create stronger, more resilient business models that can weather change and manage risk.
The willingness of contractors to move into new markets, and possibly to evolve their value proposition, could be the difference between thriving and merely surviving. With margins unlikely to rise for traditional business, such a repositioning could be vital.
Seventy-seven percent of respondents said they now have sophisticated systems to effectively manage risk. Many also said they are creating new integrated services offerings or expanding overseas to increase market opportunities.