There’s no doubt that the construction industry represents big business in the UK, contributing more than £110 billion per annum to the economy and accounting for an impressive 7% of total GDP.
However, the sector faced a myriad of difficult challenges in 2020, from the coronavirus pandemic (which temporarily shut down most residential projects in Q2) to the ongoing pressure created by Brexit.
In this post, we’ll explore the impact of these figures in further detail, while asking how you can safeguard your construction firm in 2021.
How Did UK Construction Firms Fare in 2020?
The situation was definitely stark for UK construction firms in 2020, with a whopping 33.26% of 857 respondents to a CHAS survey revealing a turnover drop of up to 20% overall.
A further 19.84% reported that their turnover declined by up to 50% through 2020, while 19.37% revealed lost revenues in excess of 50%.
Conversely, just 1.28% suggested that their turnover had increased by more than 50%,
while only 6.42% revealed any kind of hike in revenues at all throughout the year.
Business owners cited Covid-19 and its various impacts as the biggest factor in lost turnover, particularly the travel and transport restrictions that affected a staggering 42.24% of all firms participating in the survey.
A further 40.26% were directly affected by increased operating costs and falling demand, which squeezed profit margins from both ends and a seismic impact on each company’s bottom line.
Of course, such factors were also compounded by the uncertainty surrounding Brexit, while the announcement of a Trade and Cooperation Agreement (TCA) between the UK and the EU has hardly helped matters.
This came into play as the transition period ended on December 31st, and while the TCA has attempted to ease restrictions on the flow of goods between the two regions, increased custom checks, double product conformity assessments and product restrictions have impacted heavily on construction forms.
How to Protect Your Business in a Difficult Climate
In terms of the latter, there’s doubt that materials currently being imported from the EU are carrying considerably higher duties, with this compounding restrictions and subsequent time delays.
One way to partially negate this is to engage in futures trading, which enables you to enter into a ‘futures contract’ with contractors and establish a predetermined buy and sell price that prevents significant hikes on the materials that you use.
This will definitely protect against a change in price for materials such as concrete, timber and cement, which are widely used in construction projects nationwide.
Long-term investment is certainly to be advised for construction firms, especially with the economic climate unlikely to clear up completely for the foreseeable future.
With this in mind, stocks and equities may also be a sound investment for building firms, especially if owners can use their market knowledge and expertise to predict future trends and price movements.