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Brexit: implications for the Construction sector

Brexit is undeniably the single biggest issue that the UK has faced in generations. Media coverage is extensive, and every commentator has a view on the eventual implications, including in the construction industry, which contributes around £90 billion to the UK economy annually and employs around 10% of the nation’s workforce.  

All the focus from both pundits and experts is on attempting to make sense of the vote to leave the EU and contextualise what it really means, and it’s no different in the construction industry.

At a macro level, Sterling slipped as did the FTSE and various other indices, but, as anticipated, they have all made a recovery, and, in some instances, to a startling extent.

Because it happened so recently, data to substantiate various views and predications has been slow to appear; however, that’s slowly changing. Every quarter Close Brothers Asset Finance conducts a cross-sector survey of SMEs called the ‘Business Barometer’ that asks a variety of questions on a wide range of issues, including Brexit.

What the results tell us is that nationally, more than half of SMEs (56%) say they have felt no impact on levels of business from the UK’s decision to leave the EU, while a further 20% said it was too early to tell; only 24% had felt any kind of effect. In the construction sector, the results mirrored those of the UK as a whole, which makes it clear that the majority of construction businesses are yet to feel any real and tangible effects from Brexit.

In terms of spending decisions, more than three quarters (76%) of businesses have not delayed spending or investment decisions because of the EU Referendum.

Once again, construction businesses reflected exactly the national picture, but what is interesting to note is that 88% of smaller firms – those with a turnover of between £250k to £500k - were the least liable to allow the EU referendum stop them from pushing their business forward and investing.

Close Brothers has a history of lending through all economic cycles, and experience tells us that these organisations aren’t sitting on large reserves of cash, meaning that in order to maintain business levels they typically don’t have a choice but to spend and invest to ensure a sustainable flow of cash.

Firms don’t become unviable overnight; we see it as our responsibility to do what we can to ensure our customers, who are in the main SMEs, remain in business and can build towards a profitable future.

One alternative to consider is restructuring your business finances to make any rise in costs easier to deal with. A great way to do this is through asset finance, which is where our team of experts at Close Brothers Asset Finance can help.

Asset finance helps businesses spread the cost of major purchases over their life cycle. The asset delivers the same value, but the cost of its acquisition is paid in stages as opposed to a significant one-off payment.    It relieves pressure on cash flow and frees up money to pay for other essential overheads, including machinery and equipment, managing complicated operations, client pitches, and, even wage increases.

Construction is a significant player in the UK economy but there are ways to mitigate the risks and still have a productive and successful business.