A study of the growth-investment-financing nexus of the major UK construction groups

This paper compares the relationship between growth, investment and financing of the contracting operations with that of the housebuilding operations in the large, diversified UK construction groups during the 1980s. A graphical presentation of a financial analysis of the contracting and housebuilding divisions' company accounts illustrates significant changes in the levels of capital investment and the sources and uses of finance of these two activities during a period of marked growth in turnover. It is established that the major contractors not only achieved significant growth in their turnover with negligible recourse to additional capital investment but in fact generated surplus funds which could be diverted into other businesses in their respective construction group's portfolio of business activities. It is shown that their 'cash-requiring' speculative housebuilding businesses relied on such intra-group funds as a main source of finance for investment in land during the 1980s.