Change in backlog margin from 2010 to 2011
Compared to the 2011 Global Construction Survey, backlog margins appear to have improved significantly, with more than twice as many companies enjoying an increase. The proportion experiencing declining margins has also dropped a few points. The worst performing region was the Americas, where 41 percent of respondents report a drop in margins. This may be due in part to a shift in the balance of power in favor of customers, who are negotiating lower margins on future projects.
Backlog Forecast for the next twelve months
Looking ahead to the next twelve months, the engineering and construction industry appears to be fairly optimistic about backlog margins – even in the troubled Europe, Middle East and Africa region, which is a surprising response given the uncertainty over the state of the Euro. Only a small proportion forecast a decline and half expect an increase. Asia Pacific respondents are the most confident of continued improvement, again fuelled by the ongoing construction boom in China and Hong Kong, focused primarily on infrastructure.
Margin Forecast on current binds versus margins in current backlog
A majority of respondents believe that future margins will be largely unchanged – even in Asia Pacific where, as mentioned, markets such as Hong Kong are undergoing very high inflation that could push up the price of materials. However in the Americas, a third say that margins are going down, which in an industry that is already low-margin could lead to a number of failing or distressed businesses.