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Contractors Need to Refocus on Finances to Encourage Growth

Britain’s builders are struggling to pick up more work as order books sag and materials costs rise, disappointing hopes that the industry would rebound from a snow-hit first quarter of 2018.

The construction sector has had a difficult few months, from Carillion’s collapse to the poor weather in January; each has chipped away at the confidence of British brickies, sparkies and chippies. The prolonged issue of late payment and the long list of failed government initiatives have created further problems, with even the warmer weather offering little relief.

Business activity grew only slowly in May, according to IHS Markit’s purchasing managers’ index, which held steady at 52.5, just above an average rating. New order volumes further contracted for the fourth time in five months, and economists predict that’s about as good as it gets for the sector. Other factors such as Brexit and economic uncertainty have further splintered business confidence, leaving companies unsure of their prospects, and clients hesitant to commit to building decisions.

At the Credit Protection Association, many of our Members work within the construction industry and have become financially distressed on account of low demand and an even lower morale. In response, we have freed up their cash flow through our debt recovery services, chasing down unpaid invoices and eradicating late payers.

Afforded a bit of extra cash, our Members have then returned their attention to their business, investing in new technology and equipment to improve productivity and brighten future prospects.

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

“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.”

While commercial investment may be held back by economic uncertainty, a steady stream of infrastructure spending could add some stability to the market.

“Infrastructure is robust and is less affected by peaks and troughs in the market. Importantly, following successes like the London Olympics and Crossrail, the UK has a reputation for successfully delivering mega-projects,” said Max Jones at Lloyds Bank.

“This, and a strong pipeline, should ensure the investment for these flagship projects – much of which comes from overseas investors – continues to flow in.”

With the Brexit deadline steadily approaching, British businesses need to ensure their profits and morale showcase the country’s talents and competitive edge. The post-Brexit economic activity has either helped or hindered businesses, and owners need to prepare for this unpredictability. The collapse of Carillion, for example, took the supply chain by surprise and left small construction companies drowning in debt and without the turnover to fight back.

At the Credit Protection Association, we encourage our Members to retain a portion of financial cushioning, in the event of an economic blip: good or bad. Our debt recovery services achieve this through chasing down unpaid invoices and recovering residual debt that our Members thought long-lost. We complement this with our credit checks and status reports, which we use to identify the bad payment history of any customers and eradicate the late payers.

With late payment remaining a contractor’s worst enemy, and government initiatives proving to be less-than-effective, credit management companies like CPA can provide direct relief to those companies suffering from poor cash flow.

Here at CPA, 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 brightened their prospects and confidence on the construction site.