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Builders are pricing jobs well below cost, according to Paul Dreschler, chairman and chief executive of Wates, one of Britain’s biggest private companies.
“Companies are pricing at levels that are neither sensible nor sustainable,” said Mr Dreschler, an engineer who joined family-owned Wates as chief executive in 2004. “They are pricing at well below cost and either praying for a better outcome or thinking they will get the money back through litigation.”
As with much of the industry, Mr Dreschler expects the next couple of years to remain difficult as builders compete for a smaller number of jobs. “When the 152-year-old Killby & Gayford went bust, that indicated a market that is running out of oxygen. Margins are just too tight,” he said.
Pre-tax profits at Wates, whose activities range from the provision of social housing to museum refurbishment, fell 7 per cent to £40m in the year to December 31 2011 even as revenues increased on contract wins. But with big programmes including the private finance initiative and Building for Schools on hold, Mr Dreschler urged the government to take action.
“I am sure the government will procure construction and they will do it better but it is just taking longer. The lack of decision-making is frustrating for us,” he said.
The next couple of years were likely to remain difficult, with more job losses and bankruptcies across the industry. “If one or two go down it might be a good thing as pricing has to return to sustainable levels,” Mr Dreschler added.