OPTIMISM WITH CHALLENGES FOR CONSTRUCTION

More action needs to be taken to create certainty and boost confidence for construction firms, according to one of the region’s leading business advisors to the sector.

The call comes as new construction sector data shows fresh optimism among construction firms, but with challenges around cashflow and financial performance remaining due to issues such as high interest rates and ongoing delays in getting projects on site.

Joe Sullivan, partner and construction and real estate lead at MHA Moore and Smalley, said:

“The rise in the recent construction PMI data is positive news and a sign that confidence is rising among construction companies.

“However, the PMI data remains below 50.0 as the industry continues to battle with challenges on multiple fronts. Although the drop in inflation is helping with input costs, interest rates remain stubbornly high, and the further announced increase in minimum wage in April, coupled with the ongoing shortage of labour in some regions will continue to bite in the short-term.”

Joe believes next month’s spring budget provides an ideal opportunity for the government to announce a medium to long-term commitment for the sector on both investment and planning, but expects any announcements to be short-term focussed.

He added:

“Some quick wins would be to supplement existing support making entry-level housing more accessible, building on changes to permitted developments, and making it cheaper to repurpose non-residential buildings. All would help to give the sector some confidence.

“For the last few months, our commercial clients have been telling us that pipelines are very healthy, but work keeps getting deferred, presenting significant problems for cash flow and the overall financial health of those who are impacted throughout the supply chain. However, all could be set to change as customer demand returns.

“This encouraging news highlights that the construction industry is on the way up following a number of months in the doldrums. An improvement in the background economic conditions will engender confidence and the situation could improve further towards the middle of the year.”

Source: Lancashire Business Post