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Stronger Cash Flow Could Revive Lacklustre Construction Activity

4th June 2018.

Output in the construction industry held steady in May, as firms continued to play catch up from a period of severe weather in the first quarter.

The construction sector has had a tough past year. First, half of their workforce departed when Brexit proceeded to alienate the country’s EU workers, and then Carillion collapsed, and finally, Britain was hit with a bout of extremely bad weather. Needless to say, it has been hard for construction companies to get back on their feet, with so many obstacles persistently tripping them up.

The Markit/CIPS UK Construction purchasing managers’ index (PMI) found an average reading of 52.5 for the industry during May, with any figure above 50 demonstrating growth. While the sector’s performance has been lacklustre, it illustrates a growth nevertheless, and the potential for improvement. There are already signs of recovery, with housebuilding demonstrating particularly strong growth, compared to the sluggish pace of civil engineering and commercial sectors.

The economic landscape of the UK will remain murky and uncertain until a solid trade deal has been made with Brussels. This is expected to be accomplished by the Brexit deadline next year, so in the meantime, businesses need to strengthen their finances for every upturn, downturn and plummet, that the economy endures. At the Credit Protection Association, our debt recovery and credit management services award financial stability as well as the credit checks to sustain it.

Sam Teague, economist at IHS Markit, said: “Companies frequently noted that Brexit uncertainty and fragile business confidence led clients to delay building decisions in May.

“With new order books deteriorating and cost pressures picking back up, it’s not surprising to see construction firms taking a dimmer view of prospects and pulling back on hiring, all of which makes for a shaky-looking outlook.”

Supplier delivery times also worsened, with some businesses complaining that suppliers were short of materials.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Higher prices for fuel, raw material shortages, higher labour costs combined with slow delivery times were further obstacles to growth as firms nervously assessed their workforce for much-needed talent, and sub-contractors could name their price.”

Samuel Tombs, chief economist at Pantheon Macroeconomics, said: “The long investment time horizons for both commercial and civil engineering projects mean that both sectors likely will remain depressed until some clarity emerges over the UK’s long-term relationship with the EU.”

Every sector undergoes economic dips and blips, but this does not have to inevitably lead to financial distress. The collapse of Carillion was devastating, but through the combined help from third parties, the supply chain has slowly recovered.

At the Credit Protection Association, many of our members are within the construction sector and have utilised our service to jumpstart sluggish growth or coax good payment practices. The collaboration between our credit management and debt recovery services ensure that we not only supply extra cash but advise on how to use it. Our credit checks and status reports keep our members’ new financial freedom protected, and keep damaging entities from exploiting it.

We fight to the tooth for our members, particularly those who have suffered through late payment and bad payment practices. Furthermore, we recently created a new department within our company dedicated to getting our members rightly compensated in accordance with the Late Payment of Commerical Debts (Interest) Act 1998. This has unlocked hidden cash and potential for our members and strengthened their prospects and their power on the building site.