Sector review: Construction

Construction sector review infographic

 

Welcome to the Close Brothers Asset Finance update of the Construction sector. In this article 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, GMI on Close Brothers’ behalf. 

Where relevant, comparisons are made with national sentiment. 

The commentary in this review focuses on: 

  • Economic outlook
  • Funding requirements
  • Concerns & priorities
  • Clean Air Zones
  • Gender pay gap
  • Minimum pay rise
  • Emergency waste removal
  • Business rates 

 

Economic outlook

32% expect the economy to grow

Construction SME business owners are becoming more optimistic about the current economic outlook, with 32% expecting the economy to continue to grow, with a further 37% of the opinion that the worst is behind us. Only 17% (previous 25%) are worried that the UK could slip into decline again, which is less than the UK national average of 19%, while 8% feel that a true recovery is yet to happen and 7% feeling the economy is worsening.

Looking ahead, 40% of Construction firms have expansion plans for the coming 12 months, ahead of the UK average of 35%. Just over half (52%) expect performance to remain static, while only 6% envisage contraction and 2% will be putting up the ‘closed down’ signs. 

 

Funding requirements

66% find that accessing the funding they need a challenge

Despite being optimistic about the future, 66% of Construction SMEs are finding that accessing the funding they need is either a ‘major’ or ‘moderate’ challenge. Just 15% felt it’s becoming easier with 19% saying they’ve ‘never had a problem accessing finance’. 

Over half (55%) of firms will be looking to invest in their business in spite of the difficulties they face accessing the funding.

Bank loans are the most popular form of funding the Construction sector with overdrafts next followed by ‘family and friends’.

Q: What type of funding do you usually use for your business?

 

UK

Construction

Bank loan

33%

35%

Overdraft

16%

20%

Personal/family funding

15%

16%

Invoice finance

14%

10%

Asset finance

8%

8%

Credit cards

8%

8%

Asset based lending

4%

2%

Crowd funding/peer-to-peer lending

2%

1%

 

Concerns & priorities

The biggest concern for business across the UK, including Construction, is maintaining their cashflow, with late payments some way back and lack of skilled staff in third place.

Q.4b What is your main business concern?

 

UK

Construction

Cash flow

25%

27%

Late payments

15%

18%

Lack of skilled staff

13%

14%

Finding extra working capital

10%

13%

Competitors

13%

8%

Tax / VAT

6%

6%

Bank charges

4%

6%

Managing expansion

9%

6%

Access to good financial advice

4%

3%

Achieving growth is far and away the Construction sector’s main priority, well ahead of all other options, including business consolidation, development of products and services, and paying down debts.

 

Clean Air Zones (CAZ)

Knowledge among Construction firms about what CAZs are is lower than the UK average (48% v 53%) as is understanding about why they’re being proposed (43% vs 47%)

At 66%, support for CAZs in the Construction sector is good, but lower than all other industries polled and consequently the general UK sentiment.

Q: Are you in favour of clean air zones?

 

Yes

No

UK

75%

25%

Construction

66%

36%

Engineering

73%

27%

Manufacturing

76%

24%

Transport & Haulage

75%

25%

Print

83%

17%

Six in every 10 Construction firm owners indicated their willingness to pay to enter a clean air zone if the vehicle fails to meet the required environmental standards, which matches the overall UK figure of 60%. 

 

Gender pay gap

69% have a policy in place of equal pay

More than a quarter (27%) of businesses admit to there being a gender pay gap at their place of work with a further 5% being ‘unsure’; the remaining 68% were confident that there was not.

When asked about having a policy of equal pay for the same job, regardless of gender, 69% confirmed that they did have one in place with 26% saying ‘no’; the rest were unsure.

The reasons provided for why the gender pay gap exists at their organisation centred on ‘culture’ and ‘proportionality’.

Q: What are the reasons the gender pay gap exists?

 

UK

Construction

Historical reasons, including culture of paying women less

37%

43%

Proportionally, men hold more senior positions in business

37%

34%

Women are more likely to be employed in lower paid roles, for example administration

16%

9%

Women are not attracted to my sector so there are proportionally more men

10%

14%

 

Minimum pay rise

76% were well prepared for the minimum pay rise

At 76%, Construction businesses felt well prepared for the minimum pay rise that came into force in April 2018. The remaining 24% either felt unprepared or weren’t sure either way.

While support for the minimum pay rise is strong, at 84%, half of business owners feel let down by the government, saying they have not received enough support for this latest rise.

A significant minority (14%) are simply unable to afford the increased rate while a further 13% were still unsure of its impact.

Unsurprisingly, even many of those who can afford the increase said it would impact their profitability.

Q: Will your profits be affected by the minimum pay rise?

 

UK

Construction

Yes

50%

50%

No

36%

39%

Don’t know

14%

11%

 
 

Emergency waste removal 

Over a quarter (28%) of Construction firms surveyed require emergency waste to be removed, while 25% admitted to running out of space to store waste. 

An additional 30% feel that waste removal services aren’t regular enough with 16% of firms having lost business because of waste removal problems.

 

Business rates 

Close to half (47%) on Construction SMEs are happy with the business rates they pay; however, a large number – 41% - feel they pay too much, which is well ahead of the national figure of 32%. 

Over the past two years, two thirds (67%) have seen their business rates rise, either sharply or steadily; for 27% of respondents they’ve remained static. 

Views on the value for money SMEs get from their rates is quite split, with 44% saying ‘yes’ and 39% having the opposite view; the remainder don’t pay business rates. 

Where they do agree is on the subject of the need to make business rates simpler and more flexible (69%). Over half also feel the government needs to do more to assist firms with business rate relief. 

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