Update on the local construction sector

Despite the COVID-19 pandemic, many of our construction clients have been extremely busy over the past six months. With restrictions on our ability to spend our hard-earned money on travel, leisure and hospitality, a significant amount of this spend has switched to the construction sector.

Initially COVID-19 forced the closure of the construction sector but on its reopening, there has been a boom in activity due to a combination of catching up on lost time and dealing with new customers which has been a welcomed boost for business. Despite the huge costs that the pandemic has brought to the world, construction businesses have managed to adapt to the new conditions and in some areas benefitted from the enforced changes.

One of our clients advised that before the pandemic, an individual salesperson would make around 4-5 face to face customer meetings. With meetings now via video conference, they can double the number of meetings and travel costs are reduced to zero. This has brought about an increase in sales and reduction in costs. The huge demand for construction services has meant that normal marketing spend has also reduced, which in part has been forced due to the cancellation of all marketing events.

Many our clients have also taken advantage of the Coronavirus Job Retention Scheme, particularly over the earlier months of the pandemic, which helped reduce wage costs and, in some instances, made the business operate more efficiently with less staff at work.

Generally, company cash flow has been very positive over the period. Where necessary, we supported our clients by successfully applying for various Government grants, new loans, including CBILS and Bounce back loans, and assisted with the deferment of taxes and rent, existing loans and HP finance. With strong order books and additional financial support, our clients are in a much better position to repay some of their built-up debt.

However, there are still negative impacts being felt in the sector, particularly the supply chains from Europe or elsewhere in the world which has caused delays. The added impact of Brexit may also add further supply chain issues in 2021. Another cost to business is the increased health and safety aspect – with the threat of COVID-19 potentially closing sites down, businesses have had to spend more money on PPE and more time on making sites secure.

The construction sector is still extremely fragile with the ongoing threat of a second lockdown in Scotland, so it is important that businesses utilise this time to not only maintain their order books but prepare their cashflow for any possible downturn in business.

Our specialists can advise on cashflow management, forecasting and budgeting so if you’d like to discuss how we can support your construction business, please email our EQ Property & Construction team at property@eqaccountants.co.uk or contact one of our offices.