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|Construction better than 2008 but not all good news|
|Tuesday, 15 November 2016|
Sheffield based CRS Group who specialise in advising construction companies, lenders and professionals have flagged the key areas to watch as the government releases its latest quarterly construction statistics.
Keep an eye on the private housing market to make sure growth is maintained, but generally this area is expected to continue to grow as local councils plan to free up green and brown belt land for housing. This sector is up 6.5% from 2008, but beware of builders over stretching themselves, taking on projects where their cash flow is being pulled in too many directions. Speculative building relies on demand in the market being active otherwise cash flow will be hit as properties don’t sell and in turn future projects potentially delayed or cancelled due to a lack of funds.
Whilst private housing grows, businesses reliant on public sector housing might be sweating a bit as this area is down by a third from its peak in 2014 with little sign of improvement, no matter what spin the government may put on it!
Construction businesses reliant on infrastructure projects may be starting to feel the pinch as this area is still below last year. Yes, there has been a very small monthly upturn in September, but the sector is 7.7% down on last year. Are businesses cutting margins to secure work? Can they afford to and for how long?
And the same applies to the repair and maintenance sector where there has been a much bigger decline. This sector is at its lowest level for 3 years and 11.6% down on its peak in 2008. With apparently less work about the temptation is to take work just to keep going in the hope that things will get better. Maybe they will, but this approach can equally prove fatal if not carefully managed and monitored.
Managing Director of CRS Group Tim Shore said “There is a lot of uncertainty in the construction industry and businesses and lenders need to be wary that not every sector is performing well. We see many construction businesses far too late in the day and when the options available are limited. With help from specialist advisors like ourselves at CRS, a creative solution can often be found to save a struggling business.”
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