Andy Sagar, Managing Director for the Construction Division at Close Brothers Asset Finance, gives an update on the construction sector.
The construction industry is continuing to grow year-on-year thanks to low interest rates, the broad recovery of the economy and suppliers across the board having the ability to ramp up production. This coupled with the ever-increasing demand for more machinery and equipment means business owners are on the lookout for the best new recruits to join their expanding businesses.
According to recent figures from the Construction Industry Training Board (CITB), 22,500 new construction jobs are set to be created in the North West by 2020, with the region also predicted to see an annual average growth rate of 2.6% in total construction output between 2016 and 2020.
Moreover, our own recent figures taken from the Close Brothers Business Barometer, revealed that over a quarter (28%) of firms in the construction sector are looking to take on more staff over the next 12 months, with just over two thirds (67%) of these new hires to be taken on as permanent staff members.
During these times of expansion, it is vital for construction firms to have the appropriate plans in place and funding options to equal their growing workforce, especially in the case of hiring permanent staff members. Understanding what assets or finance are required to meet and manage the needs of the business is vital, particularly in phases of business growth.
In terms of the major challenges facing many firms within the construction sector looking to expand their workforce, cash flow still remains one of the most prominent ones, with the price of capital equipment remaining high and the lack of available cash on offer to firms. With this in mind, it is vital that construction firms have the necessary access to the appropriate finance suited to their needs, in order for them to fulfil their expansion plans.
From experience, we’ve seen that small companies traditionally choose to speak to their bank for a loan or overdraft, but that is not the only, or necessarily the best option, for every business. Volumes of loans acquired through asset finance are constantly rising and as a sustainable funding method that allows a business to purchase equipment and machinery with a low capital outlay, it offers a range of benefits including tax breaks and flexible repayment schedules.
At Close Brothers Asset Finance, we’re continuing to work hard and strive towards demonstrating how asset finance can become a vital tool in any construction firm's financial strategy and one that encourages and underpins their growth.