Construction in crisis

Construction crisis help – how can you stabilise?

If, as some say, construction is the barometer of the economy, then Britain is set for some very stormy weather indeed. Data provided to trade magazine Construction News by Creditsafe in September found that 158 construction companies had entered administration so far in 2022, compared with 85 at the same point in 2021.

The surging cost of materials is the main cause for the nervousness among construction firms, not helped by other inflationary pressures and rising interest rates. This inflation has been exacerbated by bottlenecks in supply chains across the globe, particularly with supplies of essential materials such as bricks, timber and cement.

If you run or work for a construction firm, how can you protect yourself and survive the crisis?

Fluctuation provisions

Andrew Boccoli, a director in the commercial property department at Edinburgh law firm Lindsays, said construction firms must take steps to protect themselves legally against inflation-driven cost hikes. By allowing for your contract price to be adjusted to reflect changes in the cost of materials or labour during the contract period, you’ll have the comfort of knowing that you’ll be reimbursed for spiralling costs.

Change of payment terms

Late payment isn’t a new issue in the construction industry. Although you might already have reasonable payment terms, go back and look at them again before you issue any new contracts – are you able to reduce the time you give to pay even further? You might also consider securing more of a percentage upfront.

This is harder for contracts you already have in place. If you’re struggling to collect payment from existing clients, speak to them fairly about your terms. Everyone is struggling from their own cash-flow crisis but this doesn’t mean you should have to suffer.

Make changes to your business model

We work with many owners of businesses who are approaching insolvency to create a plan that brings their business back into steady profit. We do this by looking at what works and what doesn’t, and providing an objective view on the aspects of the business that could be changed – or removed entirely – to make it more efficient and effective. While this could be a few tweaks, we’re also equipped to guide owners and directors through a complete business transformation.

Spot the signs of insolvency early

There are some clear signs that your construction business is approaching an insolvent position. Things like company directors having to put in their own money to keep the business running or having to delay payment for bills and tax. You might also be considering further borrowing to keep your business afloat. If you identify with this, you still have options to rescue your business. The first thing to do is talk to a professional – before your situation gets worse.

Our licensed insolvency practitioners are experts in dealing with business rescue. If your construction business is facing financial crisis, our advice and guidance could help get you back into profit. Call us on 0800 054 6590 or fill in our contact us form and we’ll call you back.

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