Profitability of UK construction contractors

The paper describes three analyses to examine differences in construction company POT profitability between (1) different financial years, and (2) different sizes of companies. In the first analysis, the aggregated profitability of a sample of 80 UK general contractors was found not to differ significantly from 3.23 percent for each year of the period examined. The size (turnover) of companies however was significantly positive correlated with profitability. The second analysis, of a sub-sample of 8 very large companies, showed that profitability enhancement was associated with diversification into housebuilding and other related activities. The third analysis, of 110 speculative housebuilders, showed profit margins to be around four times those of general contractors but uncorrelated with company size. Systematic changes were found however over the period involved. In all cases, the variability of profitability between companies was found to reduce with company size, implying a greater consistency in the financial performance of larger companies.