80. Construction Insights: Breaking down the UK's £18bn Fit-Out and Refurbishment Market
What I learned from LITTA's first construction sprint
I’m preparing for LITTA’s second construction sprint this week.
The fit-out and refurbishment sector of the construction industry is a big opportunity for LITTA.
Our top 5 clients and around 60% of commercial revenue comes from this sector.
At the start of the year, we knew little about our sector.
I introduced 6-week sprints to solve the knowledge gap and build a pipeline.
The first sprint produced mixed results. While it generated some opportunities, the most significant takeaways were the insights gained.
These insights (plus access to dependable construction sales leads) will help make this second sprint more successful.
In today’s email:
Industry
Contractors
Teams
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THE BIG IDEA
1. Industry
The construction industry is one of the largest in the UK economy, employing 9% of the entire workforce and contributing 7% of the UK GDP. Estimated industry revenue is approximately £404 billion in 2024, rising to £476 billion in 2027.
The industry encompasses a range of activities, including infrastructure development, residential & commercial construction, and refurbishment projects.
The fit-out and refurbishment subsector involves upgrading, renovating, or repurposing existing buildings, which range from offices to retail spaces to hotels and residential properties.
In recent years, the fit-out and refurbishment subsector has experienced steady growth. The sector was worth approximately £7bn in 2013, growing to approximately £18bn in 2022.
This has been driven by factors including:
The increased demand for sustainable and energy-efficient buildings
The need to modernise ageing infrastructure; and
An increase in flexible working environments
The fit-out and refurbishment sector will continue playing a vital role in shaping the built environment and driving sustainable growth in the UK construction sector.
2. Contactors
The UK construction industry has an informal Tier system that classifies construction companies by size.
No strict guidelines define Tier 1, Tier 2 or Tier 3 contractors. However, the following can be used as a guide:
Tier 1 Contractor (circa. +£500m annual revenue)
Tier 1 Contractors are the largest contractors in the UK. They may be publicly traded and international businesses.
Their revenue ranges from at least £500 million to several billion pounds. Their work includes Government infrastructure (e.g., roads, hospitals, nuclear facilities) and blue-chip private sector projects (e.g., Google HQ fit-out, V&A Musem).
Examples: ISG, McLaren Construction Group, Overbury.
Tier 2 Contractor (circa. +£100m - £499m annual revenue)
Tier 2 Contractors are medium-sized contractors relative to Tier 1. They can have a national presence, but generally, they won’t be able to compete against Tier 1 Contractors.
Tier 2 Contractors are sometimes referred to as specialist contractors because they will concentrate on being very good in one sector (e.g. building apartment blocks or office fit-outs).
Examples: BW: Workplace Experts, Readie Construction, Bouygues UK.
Tier 3 Contractors (circa. £10m - £100m annual revenue)
Tier 3 Contractors are small to medium contractors relative to Tier 1 and 2.
These are the privately held companies and family businesses that make up the bulk of the construction industry. They focus on small-scale developments, fit-out projects, schools, etc.
Examples: Clark Contracts, Osborne, Wynne Construction.
There’s an argument for a further tier to be included for construction companies with less than £10m annual revenue. These are the thousands of contractors in towns and cities that don’t really operate outside of their local territories.
They may be ‘man and van’ tradespeople (e.g. plumbers, electricians, etc) who hire in other trades to complete a refurbishment.
Examples: Chestnut Construction, Morrow Construction, Nickell & Richmond.
Contractor Type
In addition to the Tier System, there are different types of contractors that operate in the UK construction industry:
General Contractor
A General Contractor is responsible for most aspects of a project from start to finish. This includes coordinating subcontractors and managing budgets & timelines.
General Contractors are responsible for managing waste on a construction site. This includes hiring waste collection services, implementing waste segregation systems, and ensuring proper disposal and recycling of waste.
All Tier 1 and Tier 2 Contractors are also General Contractors.
Subcontractor
Subcontractors specialise in one aspect of a project, like mechanical or electrical work.
While Subcontractors generate waste as part of their work, they are not directly responsible for waste management arrangements on a construction site. They’re expected to follow the General Contractor’s waste management guidelines and ensure that waste is segregated and disposed of accordingly.
In addition to working for General Contractors on larger projects, Subcontractors may also be involved in smaller, independent projects. They are responsible for the waste they create on these projects.
Tier 3 Contractors are mostly Subcontractors.
Specialist Contractor
The lowest-level Subcontractor is a Specialist Contractor. Specialist Contractors work exclusively in one particular type of construction assigned to them by a General Contractor or a Subcontractor. This includes drywall installation, cladding, and strip-outs.
Like Subcontractors, Specialist Contractors are not responsible for waste on site and are expected to follow the General Contractor’s waste management guidelines.
Some Tier 3 Contractors, construction companies with less than £10m annual revenue, and tradespeople are mostly Specialist Contractors.
3. Teams
Tier 1 and Tier 2 Contractors
Tier 1 and larger Tier 2 Contractors have the following teams:
Procurement
Pre-Construction
Construction/Project
Health & Safety
Sustainability (Not covered in this post)
Procurement Team
Procurement secures the goods and services required to complete a construction project. It defines procurement packages, prepares tender documents, identifies suitable suppliers, and negotiates contracts.
Procurement is focused on getting the best value, building supplier relationships and aligning purchases with the Contractor’s project objectives.
Some Tier 1 and Tier 2 Contractors may have a Supply Chain team (e.g. ISG) instead of a Procurement department. Procurement is a function of supply chain management (for details, read here). However, Procurement and Supply Chain are interchangeable terms for prospecting into construction.
Typical roles in Procurement/Supply Chain teams are:
Key Decision Makers1: Procurement Director, Supply Chain Director, Head of Supply Chain, Head of Procurement
Key Influencers2: Supply Chain Manager, Procurement Manager, Supply Chain & Procurement Manager, Supply Chain Co-ordinator
Pre-construction Team
Pre-construction handles the planning and engineering services required before a construction project begins. It involves cost estimation, bid packaging and subcontractor pre-qualification and selection.
At some Tier 2 Contractors, the Procurement function sits within the Pre-construction team (e.g. Thirdway).
Typical roles in Pre-construction teams are:
Key Decision Makers: Pre-Construction Director, Estimating Director, Contract Director
Key Influencers: Pre-Construction Manager, Commercial Manager, Estimator/Senior Estimator, Estimating Manager, Pre-Contracts Manager, Bid Manager, Contract Manager, Supply Chain Manager, Procurement Manager.
Commercial Team
The Commercial team is responsible for business development and the profitable management of projects from start to finish. This involves managing a project’s finances, liaising between the client and the Project team and identifying business opportunities that help with business growth.
At some Tier 2 Contractors, the Pre-construction function sits within the Commercial team (e.g. Thirdway).
Typical roles in Commercial teams are:
Key Decision Makers: Commercial Director, Head of Commercial
Key Influencers: Commercial Manager, Quantity Surveyor
Project Team
The Project team ensures each project is completed on time, within budget, and safely. They are responsible for the day-to-day and overall success of the project, managing subcontractors, resources and clients to deliver the project.
Some Tier 2 Contractors might only have a Project team that completes the duties of the Construction team and vice versa.
Typical roles in Project teams are:
Key Decision Makers: Project Director, Construction Director, Head of Construction
Key Influencers: Project Manager, Construction Manager
Construction Team
The Construction team is responsible for overseeing the logistics of a construction project. This includes everything from ordering materials to collaborating with subcontractors. The Construction team will liaise with the Project team to deliver projects successfully.
Some Tier 2 Contractors might only have a Construction team that completes the duties of the Project team and vice versa.
Typical roles in Construction teams are:
Key Decision Makers: Construction Director, Head of Construction
Key Influencers: Construction Manager
Health & Safety Team
Health & Safety ensures construction sites comply with relevant health and safety legislation. They are responsible for worker safety and protection from hazards that can cause accidents or injuries on-site.
Typical roles in Health & Safety are:
Key Decision Makers: Head of Health, Safety & Quality, Head of Health & Safety, Principal, Health & Safety, Health & Safety Director
Key Influencers: Health, Safety & Quality Manager, Health, Safety & Compliance Officer, Construction Health & Safety Manager, Health & Safety Advisor, Construction Health & Safety Officer, Occupational Health, Safety and Environment Manager
Tier 3 Contractors
Smaller Tier 2 Contractors and almost all Tier 3 Contractors tend to have individual roles instead of teams responsible for Procurement, Pre-Construction, construction/Project, and Health and safety.
The requirements and responsibilities of the teams for Tier 1 and Tier 2 Contractors apply to the individuals carrying out a similar role at a Tier 3 Contractor.
Procurement
In general, Tier 3 Contractors will not have a Procurement team. A Procurement function will be performed by Pre-construction.
Pre-construction
Rather than having a Pre-construction team, Tier 3 Contractors may have individual roles that contribute to the function of Pre-construction:
Key Decision Makers: Buyer, Estimator, Purchasing Manager, Quantity Surveyor, Pre-Contract Manager, Commercial Manager, Owner/Director.
Key Influencers: Office Manager, Administrator
Construction/Project
Where a Tier 3 Contractor has neither Procurement or Pre-construction roles, the Construction/Project team is responsible for those functions.
Key Decision Makers: Project Manager, Contract Manager, Owner/Director
Key Influencers: Project Co-ordinator, Project Administrator, Office Manager, Administrator
Health & Safety
In general, Tier 3 Contractors will not have a Health & Safety team. They may have one role that is responsible for the Health & Safety of the whole business:
Key Decision Makers: Health & Safety Manager, Health & Safety, Health & Safety Advisor
Sustainability
For Tier 3 Contractors, sustainability is not a key consideration. A defined sustainability role is rare at these Contractors. It may be that the Health & Safety role of a Construction/Project team member is responsible for Sustainability.
This knowledge makes me better prepared for the second construction sprint.
I know there’s more to learn about the sector. Everything I learn will go into a playbook—a step-by-step guide we can use as the sales team grows.
Thanks for reading!
Matt @ The Growth Lab
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Key Decision Maker is typically a C-Suite/Director/Head of Department level prospect who delegates responsibility throughout the team and makes final, department-wide decisions.
Key Influencers are mid- or junior-level team members who don’t generally have the authority to make a final decision, but they have the power to influence the Key Decision Maker. They will usually be your main point of contact at the company.