Torbati, AHB; (2008) Relation between concentration and profitability in some UK construction markets. UNSPECIFIED thesis , UCL (University College London).

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Abstract

This report focuses on empirical study in order to find a relationship between concentration and profitability in some construction market. The data are obtained from FAME data base and Department of Trade and Industry (DBERR). In order to calculate concentration ratio, MA formula has been used. In profitability part, the ratios of gross profit over total assets, operating profit over total assets less current liabilities, operating profit over turnover are used. Two hypotheses have been set up to test. The hypotheses are: Higher concentration ratio of markets result in higher average profit margin and/or Return on Capital Employed (ROCE) of firms supplying that market, as well as relative profitability of any firm of trade A compare to trade B will change over time in the same direction as change in the relative concentration ratios of A and B. The outcome of the report is that there is weak relationship between concentration ratio and profitability in some construction industry. Moreover, there is no indication that relative profitability alters through time regardless of manner in which relative concentration ratio changes through time. Future works can be directed towards finding the reason of high volatility in concentration ratio of specialist trades as well as closer look to sub-markets.

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