Shopfitting – A New Construction Trend
19 July 2018
Construction companies tasked with changing the landscape of the UK are currently realigning their thought processes and moving towards hiring plant. It’s a trend that started in 2007 due to the global economic crisis, and could continue over the next 5-10 years, with no end currently in sight.
Change in Business Models
The simple explanation as to why construction companies are now moving towards the hiring option is because of capital expenditure. It is much easier to control capex when equipment is brought in as and when required.
This coupled with the changing dynamic of the individuals managing construction organisations has allowed a different school of thought to emerge and control the industry. 20 years ago, the ones at the top were predominantly those who had worked within all levels of construction and felt the best way to complete a project is to do it themselves. They purchased their own kit, employed their own workers, and tended to be on site working on the project.
This theory has been backed by a former CFO for Bovis, who stated in their article with Construction News, the business model in the 1970’s was to rely on breaking even during the life of a piece of kit, then making substantial profit by selling it into emerging markets overseas.
Today, there is a more systematic approach. The construction companies of old are very rarely seen and the market has been engulfed with management style companies that prefer to use subcontractors and hire their plant, whilst they manage the back-office operation and the capital side of projects. This approach was adopted by Carillion, a household name since its spectacular collapse in January 2018. The downfall of Carillion could somewhat be proportioned to its position within the public sector; at the time of liquidation, it held a high number of public sector contracts, and with the UK Government in the state it has found itself in as we career towards a ‘hard Brexit’, companies similar to Carillion could find themselves in the same position. Carillion could be the beginning of the end for management companies within the public sector.
Change in Consumerism
A possible explanation for the movement towards hiring plant is the change the online world has forced upon the high street market. The rise of Amazon and eBay has forced those on the high street to think of new, innovative ways of persuading the consumer to leave their house to spend money.
When Woolworths shut its doors, we all thought it was a one-off. Little did we know, this was just the beginning. In 2017, 6,000 stores including fashion retailers, shoe shops, and travel agents closed their doors for the last time on the high street, all driven out by the rise of internet shopping. As a last hurrah, Woolworths did attempt to turn into an online-only business, but like many retailers who have tried to challenge the online dominance of Amazon and eBay, they failed. PAL Hire examined the reasons for this failure and it lay within the issue of being able to sell enough products to cover the pitfalls of returning items.
As a consumer, if you purchase a product online, you are within your legal right to return if you do not feel it matches what you initially purchased or have changed your mind between purchase and delivery. Amazon has built a dynasty on being able to provide the consumer the return function with such ease that if a potential competitor cannot match this cycle, it will suffer in the online market and cease to exist. The online experience is just as important as the physical store experience, which has led several retailers to refurbish existing shops.
There seems to be only one way for the high street market to fight back – reduce prices. If a person can find a bargain online, they need to be able to find a bargain at a physical store to entice them to enter. The reduction in price of summer clothing held back UK inflation at 2.4%, according to the Office of National Statistics (https://www.bbc.co.uk/news/business-44870138).
The big wigs at the top of highly-prestigious organisations believe the best way to entice consumers into their stores is not to build more stores, but to improve upon what they already have in place. This is also being replicated within the office construction sector as the number of new builds are down as the market turns towards refurbishment.
A prevalent school of thought is that high street stores are responsible for their own downfall. They were complacent and possibly thought they were bigger than the online market, which caused them to open a greater number of stores. It has recently been announced New Look will be closing 60 of its 600 stores throughout the UK. The discount retail market has also been affected by store closures as it was reported by the BBC, Poundworld will close a further 40 stores, after it entered administration in June 2018. PAL Hire will continue to monitor the situation as this has the potential to result in the discount retail market transforming into a monopoly if Poundland or Poundstretcher face the same troubles as Poundworld.
Change in Rates
A certain group of commentators believe UK legislation is negatively impacting high streets and the online world has an unfair advantage due to law around business rates. It has been reported 55,000 retail related premises will face an increase of over 3% in their business rates for the 2018/19 fiscal year, which could cause further closures amid challenging times for the high street.
The law does not impact online retailers as much as it does the high street simply due to the lack of physical premises and the evasion of paying property tax. This issue will more than likely not be rectified until 2022, but by that time it may be too late for the high street given the rise in technology and consumers preferring to live an easy life rather than spend their time in physical stores.
Change in Construction Projects
The shift in the high street has impacted construction companies as refurbishment projects have much tighter margins than new builds. This need to maximise profits has caused construction organisations to restructure their operations and begin hiring plant as it’s an easier way to eke as much profit as possible from a project.
The best way for a construction company to maximise their profit is to use a hire company capable of providing every possible piece of equipment required to complete a project on time and within budget. This is where PAL Hire exceeds all expectations and is proven to be the most reliable, most consistent, and most competitively priced hire company across the UK.
Whatever you need, wherever you need it, whenever you need it, we will be able to service your request. Due to the excellent relationships built by our dedicated account managers, we can guarantee 24-hour delivery of equipment such as skips, powered access, site storage, and plant, so if you need something last minute, we’ll still be able to meet your requirements.
If you’ve recently secured a shopfitting project, or any type of construction project and wish to maximise your profit, contact PAL Hire on 0844 288 7265 and we’ll be able to give you the very best industry rates, ensuring you receive maximum savings and maximum profit.