Quality, Consequences and the Construction Industrial Complex (part 409).
The sad demise of M J Lonsdale (MJL) has made me reflect. I remember the companies arrival on the London scene in the 1980’s and worked with them on several Deutsche Bank projects in the early 00’s. They were good and better than most of their peers. Their demise highlights the real problem in the AEC business, no one is actually making any money.
AEC businesses are a bit like UK football clubs, the players make the money and a vanishing few clubs make real money. Take MJL, their 2022 year end accounts show a turnover of 191m GBP and a profit of 2.5m GBP i.e. a net profit before tax of 1.31%!!!!!. The previous years profit was 2.6m GBP on a higher turnover!
1.31% is not a profit, it is a rounding error. Unless your business is making north of 10% net profit consistently your business will eventually fail.
Why would anyone start an AEC business? There are no profits to be made unless you are an excellent operator. BTW: most firms are awful operators. Most people in AEC sectors are like squirrels watching a bank robbery. Saw the whole thing. Never understood in the slightest how it was all financed and done.
The free market is doing its work in clearing out the week players and leaving the strong. The results of all this IMHO is:
1. It will be harder and harder to attract talented people because no one is making money.
2. As the weaker firms go away the remaining few will be able to put up prices. If you are a client, prepare for inflation and a competition for talented teams.
“There are decades where nothing happens; and there are weeks where decades happen.” (Vladimir Lenin). I think we are in the “decades in weeks” phase for the AEC sector world wide. The next 10 years will be challenging and only the best will survive and make money.
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