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Construction industry update

Welcome to the Close Brothers Asset Finance update of the construction industry where we highlight a wide range of issues relevant to SMEs in this industry.

The results are based on the Close Brothers Business Barometer, a quarterly survey of close to 1,000 SMEs across the UK conducted by specialist independent researcher, Lightspeed, on Close Brothers’ behalf. Where relevant, comparisons are made with national sentiment.

The commentary in this review focuses on:

  • Economic outlook
  • Finance requirements  
  • Concerns & priorities
  • Mental health
  • Environmental responsibility
  • Traffic congestion
  • Recycling rates
  • Broadband speeds  

 

Economic outlook

Construction SME business owners’ views about the economic outlook are broadly in line with the rest of the UK, with 38% confident the economy will grow (UK: 37%) and a further 30% feeling that while it will take longer, better times are ahead (UK: 29%).

A significant minority (28%) are concerned that the economy could decline and haven’t experienced any true economic growth.

Looking ahead, just over half (51%) of construction firms expect their performance to remain static, while 36% are hoping to expand their operations in 2019, which is slightly less optimistic than the UK average of 38%. Only 10% predict their business will contract.

 

Finance requirements

Despite businesses in the industry showing a strong willingness to invest, nearly one in four (38%) of those polled are finding it a ‘major challenge’ to access the funding they need and more difficult than it was a year ago. A further 28% are saying that it hasn’t become any easier to get hold of finance and is as problematic as it’s ever been.

A combined 33% say it’s either become easier or they’ve ‘never had a problem accessing finance’.

Regardless of the challenges, 63% of business owners said that they would be seeking funding for business investment in the coming 12 months.

 

Concerns & priorities

Maintaining cash flow is by far the biggest concern for businesses in the Construction industry, with 36% selecting this option. ‘Competitors’ (14%) and ‘late payments’ (12%) come in second and third, some distance back. 

At 36%, ‘achieving growth’ is the construction industry’s main priority, followed by ‘paying down debts (27%) and ‘business consolidation’ (25%).

 

Traffic congestion

A large majority of construction businesses (81%) feel that traffic congestion is a significant problem in the UK and it’s only becoming worse, according to 60% of those surveyed.

This is impacting 48% of Construction companies’ ability to trade or operate at their full capacity, ahead of the UK average of 41%; for a further 48%, traffic congestion has negatively impacted profitability (UK: 41%).

Over half (51%) feel the current road network is not sufficient to cope with existing traffic levels.

 

Mental health in the workplace

Nearly three out of five (58%) of construction business owners believe people with mental ill health continue to be stigmatised in the workplace, which is 4% more than the national average. To help protect anyone affected in their teams, 60% of firms have the requisite policies in place to support those who work for them.

Half of those polled believe there is sufficient government assistance – including advice services – for SMEs to help support employees with mental ill health.

Construction firm owners – 87% - are overwhelmingly in favour of a mental health helpline, along the lines of the NHS 111 service, to help those in need to be referred to the most suitable service, depending on their requirements. This is because many firms, notably those at the smaller end of the scale, don’t have the resources to offer their employees the relevant support they may need.

 

Environmental responsibility

Three quarters of businesses in the construction industry are actively encouraging their employees to be more environmentally responsible, with 71% going as far as saying they would consider offering employees one day off a year to volunteer for environmental causes.

Most (76%) construction firms prioritise the financial cost of goods over their environmental impact when making procurement decisions; however, 79% make a conscious effort to separate recyclable materials from the waste they produce.

 

Social media  

Over half (54%) of businesses in the construction industry use social media as a sales tool, with Facebook being the most popular followed by Twitter and Instagram.

Forty three percent of construction firms employ someone to drive their online presence, which has had significant success, with 52% having made sales off the back of social media.

 

Broadband speeds 

Speed of broadband has become so critical that for 56% of firms it would be an influencing factor if they decided to relocate.

In the main (84%), construction businesses are content with their broadband speeds; however, a third of those polled admit to having lost business because of slow speeds.

Construction operators are, for the most part, pleased both with their provider’s responsiveness and value for money, both 76%.