The construction industry has started to feel the pinch of a challenging wider economic environment following several months of post-pandemic growth. Private new housing work has shown the largest fall, most likely due to fears about a recession creeping into consumer confidence.
With inflation now over 10% and some analysts forecasting as high as 18% next year, the price of building materials is likely to continue rising and supply chain difficulties likely to continue. Typically, the UK Government’s response to rising inflation is to raise interest rates, which slows spending, lowers demand and increases the attractiveness of saving. The trouble is, lower demand has a wide-ranging effect on businesses and ultimately the level of employment.
So, what does this mean for construction businesses?
Construction work is very unlikely to stop entirely, even during the pandemic large areas of construction carried on, so here are our tips on staying strong in difficult times.
1) Consider finance
An unlikely first point, and sometimes people look down on borrowing, but rarely do we buy houses or cars with cash. It’s the same when building a business. Securing funds to give your business an instant boost can make sure your firm thrives and adapts, or that you can take on new jobs.
Business loans allow you to cover operational costs or cover the gaps between invoices and getting paid. The UK Government have also re-launched the Recovery Loan Scheme so right now you can borrow and your principal private residence cannot be taken as security.
With interest rates predicted to keep rising throughout 2023, if you did want to invest in your business, now is the time to do it.
2) Be the best at what you do and making sure potential customers know it.
Keep standards high to boost word of mouth referrals, make sure you’re getting online reviews, that your website looks professional, and that any social media you use is up-to-date and reflects well on you. Being found drives business and helps clients choose you over competitors.
3) Consider bulk-buying materials and van stocks.
Storage can often be an issue in the trade but if you have a lock-up or secure storage, buying materials that won’t degrade at today’s prices will mean in the end they cost less and don’t cause delays on the job.
4) Look at new materials and new ways of working.
High energy prices are driving demand for solar power and heat pumps, increasing digitalisation is driving the need to incorporate more cabling and internet-enabled devices into homes, the need for sustainability is driving new materials such as graphene in concrete. Make sure you have the skills to adapt and take on a wide range of jobs.
5) Make sure your vehicles, plant & equipment are up-to-scratch.
Old equipment and vehicles tend to fail most in the upcoming cold and wet of autumn and winter. New equipment tends to be safer, save you time and particularly replacing old vans, reflects well on your business. New vans are also more efficient and have the latest features, including safety equipment, so they’ll cost less to run.
6) Manage your labour carefully.
The labour shortage can make finding the right subbies difficult and add time to the job, but their work reflects on you. Take time to find the right partners and treat them well when you do. However, people costs are a large part of any job, making sure your contractors are efficient, on time and effective all day is important in maximising productivity and controlling your costs. Keep jobs on track with good people management.
7) Look after yourself.
The construction industry carries a high risk of accident, and you can’t work whilst injured. Jobs will be missed and you won’t be earning. As the evenings get darker and the weather worsens, don’t scrimp on the PPE, make sure you can continue working.
Portman Asset Finance is both a lender and broker that has been supporting construction businesses with finance solutions since 2007. A provider of Hire Purchase, Lease Finance, Equity Release and Business Loans to over 10,000 customers, they have secured nearly £1bn in funding, helping UK SMEs to grow.