PwC construction viewpoints - Yan Ricaud

Yan Ricaud
Deputy construction industry and ABAS industry leader, Paris, France

What are the three biggest issues facing the construction industry?

The three biggest issues facing the construction industry are:

  • to diversify into services and concession activities (car parks, motorways), which provide a volume of recurrent activity with a higher gross margin
  • to develop the most profitable activities (electrical or road construction for which barriers to new entrants are greater)
  • external growth by acquisitions at home or abroad.

What keeps your client CEOs awake at night?

  • large variations in share prices on the international stock markets
  • adapting overheads to activity levels negotiations on contract terms which can be time-consuming and complex
  • increased arbitration and/or litigation in the settlement of international projects
  • country risks on uninsured international contracts.

How has e-business affected the construction industry and how will it further affect it?

E-business affects the construction industry activity in several ways:

  • company purchasing policies have been modified by the development of intranet networks and databases where negotiation of prices and purchase conditions are centralised with major suppliers
  • on-line purchases have increased significantly
  • move towards electronic transmission for accelerated document processing within the different operators
  • new opportunities to work with decentralised engineering offices.

Which new business models and contract types do you see evolving in the construction industry?

Business models and contract types are impacted by a key industry trend: players try to be involved earlier in the definition of projects to improve their added value. Typically they look to propose up front assistance and consulting services to their clients including:

  • project definition
  • choice of technical solutions
  • financing.

How will the construction industry look in the future?

Traditional construction activities, which are technically simple, generate only small margins. In a global market, large groups will continue to focus on:

  • services activities, particularly concessions which bring higher returns and recurring margins
  • electrical works, including both green field and replacement of existing installations
  • road construction maintenance
  • mergers and acquisitions, taking advantage of economies of scale, subject however to the limitations imposed by anti-trust laws.