The Construction Products Association’s Construction Trade Survey for Q3 makes for positive reading on the surface, but is overshadowed by uncertainty for the ‘not-so-distant’ future of the construction industry.
Despite an eighteenth executive quarter for growth in UK Construction, aftereffects of the EU referendum are seen as the main source of doubt, with a depreciation in sterling and rise in material costs. A fall in profit margins for a reported 31% of contractors is the worst recorded in 5 years.
Output is at a record high across key industry sectors, but does this increase risk for main contractors who are working with such low margins?
Rebecca Larkin, Senior Economist at the CPA (Construction Products Association) said: “[There is] a division in fortunes across sectors with weakness in commercial and industrial sectors offset in new build private housing, a sector where demand and confidence remain supported by the ‘help to buy’ equity loan.
“[The] construction industry continues to experience cost inflation, particularly for raw materials. A clear consequence of the supply chain trying to absorb these higher costs is the fall in contractors’ profit margins since the start of the year.”
What options do main contractors have in such risky times? The retention of key staff members during time of skills shortages is seen by many as key for the largest contractors. Marie-Claude Hemming, director of external affair at the CECA asked for commitment from the UK government on projects outlined in the National Infrastructure Delivery plan ahead of the Autumn budget. Chancellor Philip Hammond has responded with his £44bn pledge for investment in new housing over the next five years, committing to build 300,000 new houses a year.
With constant pressure from industry bodies and the mainstream media, main contractors could look to focus their attention on new technology that will help to protect their profit margins by cutting down administrative and risk associated costs.
Payapps.com is a cloud collaboration platform managing the entire construction project payment application and certification process. Drastically reducing time spent managing the application process, the system helps mitigate Construction Act risk and strengthens supply chain relationships, to help avoid costly disputes.
To see how Payapps.com can help manage your application process more efficiently so that you can focus on protecting your margins, call us on 0192 280 5076 or book a free demo here.
Read the CPA Trade survey results here.