LONDON--The U.K.'s construction sector could provide a bigger boost to the economy if participants were more realistic on pricing, a report showed Wednesday.
A study by the Institute of Chartered Accountants in England and Wales, or ICAEW, shows that during the U.K.'s recent economic downturn, a number of contracts may have seen firms cutting their prices in order to win business that was, at the time, scarce.
As a result of that, some contract price expectations are now lower than they should be, and could limit the contribution to growth from the construction sector.
Indeed, given the pace at which the construction sector, led by residential building, is now expanding, expectations of just how much the sector should be boosting the economy are growing.
"Construction firms have to bid realistically and responsibly; they need to get the costing of bids for contracts right," said Phil Westerman, a member of the ICAEW group that produced this report.
"At the same time, we need buyers of construction services to be more focused on value and quality, and less fixated solely on price. Companies are still struggling to deliver on tight contracts signed in a period when bids were priced very aggressively and with tiny margins. Without sufficient margins, they won't be able to invest and innovate, which is critical for the sector to fulfil its potential as a key contributor to U.K. growth," Mr. Westerman said.
The U.K. construction sector grew 0.3% in the first quarter of this year according to a preliminary gross domestic product estimate published last week. Meanwhile, the latest survey from data firm Markit, also published last week, suggests the sector maintained a healthy pace of growth going into the second quarter after growing for a fifteenth straight month in April.
Write to Ilona Billington at ilona.billington@wsj.com
(END) Dow Jones Newswires
May 06, 2014 19:01 ET (23:01 GMT)
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