L
overs of milestones will be intrigued to see that the construction
industry now has its first US$ 100 billion per year contractor,
China State Construction Engineering Corporation (CSCEC).
This company, which employs more than 216,000 staff sits at the top
of this year’s ranking of the world’s 200 largest construction companies,
which can be found on p.14 of this month’s magazine.
A company that size is difficult to mentally get to grips with. For
example, its revenues are on a par with the GDP of a decent-sized
country like Morocco or Slovakia.
Another striking thing about CSCEC and a few other of the major
Chinese contractors is how quickly they have grown. Ten years ago
CSCEC had a respectable ranking in
iC’s
league table at no. 25, but
with revenues of just US$ 6.4 billion, so in the last decade CSCEC has
increased about 17 times in size. Compare this to Vinci, the top-placed
contractor in the 2004 edition of the Top 200, which in the same time
has only about doubled in size.
What’s more, in 2004, you needed revenues of US$ 23.2 billion to sit
at the top of the
iC
200. This year, you needed more than four times
that amount.
If that tells you one thing about how the industry has changed in the
last ten years, it is that the big contractors have got even bigger. This is
not just true for those in the top 10, but it is a reflection to some extent
of the entire league table.
For example, back in 2004 the top 100 companies had revenues of
some US$ 579 billion, which was equivalent to maybe 10% of global
construction activity at the time. In this year’s ranking the 100 have
revenues of US$ 1,386 billion – more than double what it was ten years
about, and getting on towards 20% of global construction activity.
Some of this growth has been due to the markets – clearly China’s
contractors have seen benefits from the phenomenal growth of their
domestic industry over the last decade. Industry consolidation has also
played a part, but more in terms of individual companies climbing the
table. I would argue that the development of the huge contractors of
today is more about organic growth than mergers and acquisitions.
But the global scale of the industry adds some interesting perspective.
As huge as CSCEC has become, it has maybe only about a 1.4% share
of the global construction market, which could be as large as US$ 8.5
trillion per year. Compare this to manufacturing industries, where a
global market leader could be expected to have a 10% share or more.
Of course you can’t expect industries as big as construction, or those
with similar characteristics, like mining or oil, to operate on the same
principles as manufacturing. However, it is interesting to reflect that if
a construction company were to have a 10% global share it would have
revenues of around US$ 800 billion and employ more than 1.5 million
people.
That doesn’t sound achievable, but what are the limits of how big
a contractor could get? Ten years ago a US$ 100 billion construction
company would not have sounded a very plausible proposition, just as
another four-fold increase over the next decade seems unlikely.
But at the same time, the large Chinese contractors are growing faster
than their peers in other countries, faster than global market growth
and faster even than their domestic market is expanding. It
is difficult to know if, when or where the ceiling will
be reached.
Chris Sleight
Editor
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COMMENT
3
july-august 2014
international
construction
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