Construction Sector Recovering From Carillion Crisis

8th March 2018.

Britain’s stagnant construction sector is beginning to show signs of life as commercial building work accelerated in February at its fastest pace since May 2017.

In the last year, the construction sector has struggled to keep afloat. Factors such as the departure of EU workers, the skills shortage and the controversial apprenticeship levy, have all contributed to its slow performance. The collapse of the construction giant, Carillion, back in January also did not help, with its effects felt all the way down the supply chain. The sector appears to be recovering, however, with homebuilding accelerating faster than it was in January, and at a rate faster than economists expected.

Of course, the sector still has a long way to go, with skilled workers in short supply and the country’s late payment culture still causing trouble for the sector’s smaller construction companies. At the Credit Protection Association, we free up cash flow that our members can use on improving their business. This extra cash could be used by contractors to fight late payers, or on expansions or technology that could propel the sector even further.

According to the IHS Markit’s purchasing managers’ index (PMI), homebuilding increased to 51.5, up from 48.1 in January and above the 50-mark which indicates growth. But civil engineering work fell into contraction with a PMI of 47.3.

Economists are relieved the top-tier contractors of the sector have relatively recovered from Carillion’s contagion, but Max Jones at Lloyds Bank insists that it is still being felt further down the supply chain, and hopes more large firms will proceed to offer them assistance.

“On the positive side”, Mr Jones adds, “There continues to be evidence of the increasing use of technology in key schemes. Deployed more widely, this creates the potential for better project management and, in the long term, improved profitability and margins.”

Eduardo Gorab at Capital Economics agrees that the resurgence in commercial and residential building is “an encouraging sign”, but he doubts that it could be the start of a strong upspring.

The construction sector is one of the major drivers of the UK economy, providing the houses and office buildings that make up our rich culture. Of course, this comes at a price, and the sector has seen their wages held back through so-called retentions or have succumbed to extensive supply chain bullying by the larger companies. The economy cannot hope to improve if the country’s sparkies and brickies do not also see the benefits. Larger companies are finally working together with small firms to dispel late payments, and retentions are heading for the scrapheap.

To ensure the sector continues to stay on the positive side of growth, firms must pay close attention to their cash flow. Credit management companies like us at the Credit Protection Association, free up cash flow for business owners, giving them the financial freedom to explore other projects, as well as protect their own. Our debt recovery services chase down late payers and bad payers and recover bad debt, freeing up our members’ cash flow for other ventures. Furthermore, our credit management products protect our members from getting embroiled with bad customers in the first place. We recommend all business owners credit check their company, as well as all who they do business with- customers and suppliers. This should stop contractors from falling victim to the next Carillion, as well as ensuring this current good behaviour continues.

The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!

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