Morgan Sindall warns projects being delayed due to inflation

Morgan Sindall, consistently one of the UK’s most financially successful construction contractors, is finding planned projects jeopardised by rising costs.

Chief executive John Morgan With the UK economy now in the grip of double digit inflation – and with the two candidates for prime minister having diametrically opposed views on how or whether to tackle it – the impact on construction workloads is starting to show.

Morgan Sindall said that inflationary pressures were impacting margins and leading to projects being put on ice.

“Where projects are active and underway, the additional costs arising have generally been offset by a combination of contractual protection, operational efficiencies, flexible sourcing and (in the case of Partnership Housing) by house sales price inflation,” the company said. “On projects where it has not been possible to mitigate all such additional costs in full, the resulting impact on margins has been unavoidable.

“Where projects are being priced for future delivery, the inflationary environment has continued to place some project budgets under pressure particularly in Construction & Infrastructure, which in turn has led to some delays in decision-making and project commencement. “In Urban Regeneration, construction cost inflation has also provided additional challenges to the returns on some of its active developments and on the viability of some of its schemes being evaluated prior to commencement.”

Despite these significant headwinds, Morgan Sindall’s results for the six months to 30th June 2022 showed a record half-year performance for the group. Revenue was up 9% to £1,698m (2021 H1: £1,559m) and pre-tax profit was up 2% to £53.7m (2021 H1: £52.4m).