Construction sector remains not for the faint hearted

The construction sector is not for the faint-hearted especially in the wake of Brexit, warns Simon Campbell, a director of business rescue and recovery specialists Quantuma.

Many SMEs were never far from financial disaster and needed to be ever more vigilant, he cautioned.

His comments came against a spate of contradictory reports on the state of the sector, some claiming it is doing well and others maintaining it is back in recession.

Mr Campbell said: “SMEs in the construction sector are prey to numerous pitfalls from the fiendish complexity of some contracts and lack of tailored funding, to the twin temptations to underquote or overtrade, to commonplace late payment and aggressive final payment negotiations from clients.

“The sector remains not for the faint hearted – news of temporary financial weakness spreads like wildfire and can be fatal. Formal insolvency is never far from being a reality for many and, more than any other industry, the gap between achieving success and ceasing to trade is thin.”

Noting that a number of asset-based lenders had recently come forward with “sensible” invoice discounting and factoring products, he went on: “This does provide a welcome new source of financing, although both sides should tread with particular caution to ensure that aims and expectations correspond.

“More generally, common sense dictates that each contract should be read and all bespoke amendments understood prior to being entered into by signature or by action. You should make sure everything is in writing especially if progress is frustrated by others or factors beyond your control. And regularly check contract terms at every twist of the road.

“It’s crucial also to know when to take advice from external professionals and indeed who to trust in that regard. However, caution towards your client, your suppliers and above all protection of your own organisation is perhaps more important.”

Construction, noted Mr Campbell, often leads the way in both recession and recovery and to that extent provides a significant marker for the future of the rest of the economy.

He commented: “In terms of Brexit, it is of course too early to draw any firm conclusions. Uncertainty over the short-term relationship with Europe will undoubtedly halt some aspects of larger scale investment and one can imagine that big-ticket infrastructure might well take a hit over the next few years – for instance, in recent years, the European Investment Bank has provided around €43 billion of funding for UK projects.”

“Nevertheless, the UK for the most part has a considerable shortage of housing, affordable or otherwise, and successive governments seem committed to stimulating house-building, not least by engaging with the stifling tendency of current planning regulations. Brexit, apart from knocking Central London property prices for the first time in over 20 years, will not change this longer term demand stimulus.

“It has led to a weaker pound though which has increased purchase costs at a rate not seen for more than five years.

“It has also led to a significant cross-roads in terms of labour supply, with Eastern Europeans particularly, who add much needed flexibility and variety to the skilled and semi-skilled labour market, questioning the changed political weather and their consequent commitment to the apparent win/win deal of the previous 10-15 years.”

 

For further information, please contact:

Andy Skinner, Managing Director, ASAP PR – 07990 978257
or
Marie Wadeson, Head of Marketing,
Quantuma LLP, Vernon House, 23 Sicilian Avenue, London, WC1A 2QS
Tel: 07464 545678

www.quantuma.com

 

Notes to Editors

Quantuma LLP is a leading restructuring and insolvency practice delivering partner-led solutions to businesses and individuals facing financial distress with offices in London, Southampton, Marlow, Watford, Brighton and Bristol.