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Construction Industry Update 2020

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

Manufacturing Industry Update 2020

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.

Economic outlook

Construction SME business owners’ economic outlook is particularly positive when compared to other sectors, trending well above the rest of the UK. Half of those polled are confident the economy will grow (UK: 36%) and a further 27% feeling that while it will take longer, better times are ahead (UK: 27%).

Only 16% are concerned that the economy could decline and haven’t experienced any true economic growth.

Looking ahead, 42% of construction firms expect their performance to remain static, while a very impressive 56% are hoping to expand their operations in 2019, which is 20% above the UK average of 36%. A statistical negligible minority of 2.3% believe their business will either contract or shut down.

Mental health

While the impact of mental health continues to be felt across the SME community, with 47% (UK: 40%) of construction firms in the UK reporting that at least one of their employees has taken time off work because of it, attitudes are changing for the better. Only 5% of SMEs in the sector are of the view that feelings towards those suffering from mental health are becoming worse, against 49 who say it’s changing for the better.

In addition, 45% (UK: 38%) of SMEs have noted an increase in reporting of mental health issues over the last three years while nearly six in 10 construction firms polled have taken steps to actively raise awareness of mental health among employees.

Concerns and priorities

Maintaining cash flow is by far the most pressing concern for firms, with 40% of respondents selecting this option. This shouldn’t be surprising given the margin pressure construction firms face; any events that impact cash flow can have a disproportionate impact on a business’s profitability and productivity. 

In distant second, at 15%, are worries about being able to source skilled staff.

At 54%, ‘achieving growth’ is by some distance the construction sector’s main priority, followed by ‘paying down debts’ (19%) and ‘business consolidation’ (13%).

Finance requirements

Accountants are – by some distance - the first port of call for financial support and advice, ahead of financial advisors and bank managers, which clearly demonstrates their changing role in the modern business environment. Bank managers are today more remote from the funding decision-making process and consequently don’t have the type of relationship with business owners that they may have done in previous generations. 

Despite construction firms’ positivity, a large number (38%) are finding it a ‘major challenge’ to access the funding they need and more difficult than it was a year ago. A further 32% 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 30% say it’s either become easier or they’ve ‘never had a problem accessing finance’. 

Despite the challenges obtaining finance, a strong number (68%) of business owners said that they will be seeking investment funding in the coming 12 months.

Charity support

Construction firms are convinced about the importance of charity support and fund raising to employee morale, with a combined 66% feeling it creates a bond in the team and gives their workers something positive to focus on. A quarter feel it ‘makes no difference’. 

In total, over half (55%) of construction companies actively support a charity, which is exactly the UK average of 53%. Some firms; however, feel they’re not ‘big enough’ to support a charity. 

While 61% of firms feel that supporting a charity says something positive about a company's culture, a further 41% think people are suffering from ‘donation fatigue’. 

Ageing workforce

Despite construction SMEs overwhelmingly understanding the benefits of employing older workers - with their experience being particularly valued along with their ability to mentor more junior members of the workforce – 68% feel that the recruitment process discriminates against older workers. 

While 61% of firms are comfortable with being able to recruit the talent, they need in the coming five years, 27% are predicting problems in the future and a further 13% say they’re already struggling.