Property & Construction

Challenges Ahead for UK Construction Businesses

The construction sector is the bedrock of infrastructural development in many countries, and the UK is no exception. It not only provides millions of jobs but also shapes our urban and rural landscapes. However, recent trends suggest that UK construction businesses are set to face some unprecedented challenges in the coming years.

6th November 2023

Weaker Pipelines for Future Projects

A notable concern for these businesses is the apparent weakening of pipelines for future projects. This decline is not a simple result of decreased demand or a slowing economy, but a more complex interplay of factors. The most significant of these is the increasing uncertainty surrounding cost budgets. Many potential clients are hesitant, unsure of when the right moment will be to initiate projects. This delay and indecision, viewed from the customers’ perspectives, stems from a rapidly changing economic environment, making long-term commitments risky.

Variable Flexibility in Cost Base

The structure of construction businesses varies widely. Some enjoy a considerable amount of flexibility in their cost base. This is largely because they rely heavily on sub-contracted organisations or individuals for a substantial element of delivery of their work. This model, while having its pros and cons, allows for a certain degree of adaptability in terms of scaling up or down based on the volume of work.

On the other hand, several companies don’t have this level of adaptability. Such businesses have a more fixed cost structure, making them more vulnerable to fluctuations in project inflow. Regardless of their operational model, it’s becoming increasingly evident that all businesses in this sector must possess the ability to react and respond swiftly in the face of declining work levels.

The Need for Business Flexibility

Given the current circumstances, construction businesses must prioritise flexibility. It’s crucial to be proactive rather than reactive, strategising and planning for anticipated challenges before they take a toll on operations. Being nimble, adaptive, and ready to pivot is becoming a non-negotiable trait for success.


Emphasis on Financial Forecasting

Financial clarity is the lifeblood of any business, and for construction firms likely facing the sorts of challenges noted above, it’s imperative. Businesses must now, more than ever, emphasise profit and cash flow forecasting. Having a transparent and forward-looking view of financial outflows and inflows ensures that they can navigate any potentially turbulent waters of the coming months and years.

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The Property & Construction Team at Old Mill are specialists in financial advice for businesses and individuals working in the property & Construction industry.  Feel free to get in touch Click here…