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Our geographical coverage and expertise means we have first-hand experience of advising all types of construction businesses. This advice is broad-based, encompassing everything from strategic development opportunities and financial modelling of key development projects through to a full restructuring and turnaround exercise.

Most UK industries are currently facing issues emanating from the implications of political and economic uncertainty and the construction sector is certainly part of this hazy picture. Activity across the industry remains high but optimism for the short-term future is subdued.

The headline statistic that creates cause for alarm is that 20% of the top 100 players in the industry made a loss in 2017 and late payment continues to be a huge problem and driver of distress. This malaise isn’t showing any sign of slowing as we enter 2019 and post-Carillion, it seems everyone is looking over their shoulder.

A recent IHS/Markit Survey indicated that supply chain pressures were among the most intense since early 2015 which leads to enhanced pressures on margins and lead times. In early 2018, 93% of heavy side manufacturers and all of those on the light side reported an increase in costs compared to the previous year.

The Financial Policy Committee has also begun to state concerns about uncontrolled lending and a possible credit bubble emerging with the implication that lenders may become more stringent in their demands, which would inevitably dampen consumer demand.

Brexit – Deal or no deal?

Looming large across all industries – particularly construction – is the uncertainty over the government’s ability to negotiate a palatable deal with the European Union which is off-putting to investors and affects forward planning.

The early effects of a potential labour shortage are already apparent with industry leaders strongly urging the adoption of an Immigration Bill that ensures that British business has access to sufficient levels of skilled EU workers.

Brian Berry, Chief Executive of the Federation of Master Builders, stated in June 2018: “EU tradespeople have come to play a crucial part in plugging the industry’s chronic skills gap and if the ability to employ non-UK workers is curtailed, the government’s housing and infrastructure plans will be no more than a pipe dream.”

With such a muddled picture, the construction sector is holding its collective breath but from the trends we’re seeing, it’s clear that many businesses are struggling to hold much longer.  If you would like a consultation to discuss your construction industry concerns, you can speak directly with our Regional Managing Partner, Paul Stanley. Paul has a wealth of experience advising businesses from start-ups to established multinationals and has a candid, forthright approach in tackling issues head-on.

Recent work in the construction sector includes:

Review and Restructure of Mechanical Firm

A multi-disciplined mechanical and engineering company required working capital funding and potential restructuring. Our team of restructuring specialists initially undertook an Independent Business Review, to understand the financial and commercial situation of the business. We were then a position to develop an appropriate restructuring strategy and work with management to support them through the process, including post implementation monitoring and control.

With our team’s guidance the restructure was successful, a major turnaround of trading with equity investors receiving a dividend, whilst maintaining a good relationship with the management team.

Successful Sale Saves Building Jobs

A building business had grown very rapidly from a turnover of £700,000 to £5m. However, although they had profitable contracts moving to completion, they did not have sufficient capital and cash reserves to fund four concurrent contracts that were making a loss.

We were instructed as administrators and, having established that over-trading had caused the firm’s difficulties, we were able to find a buyer with sufficient resources to fund the business post-sale, saving 20 jobs.

Independent Business Review of Co-operative in Portugal

This co-operative was engaged in the development and construction of housing for its members. The bank had withheld new funding for the development of a new project due to financial difficulties that the co-operative were experiencing. On advice from the bank, we were engaged by the co-operative as advisors. The engagement included consulting with a number of parties, reviewing several cash flow projections and determining feasibility of the project, which allowed the bank to provide the funding necessary to complete the development. Without our involvement, the bank would not have agreed to a new finance package for the co-operative. The completion of the development materially enhanced the bank’s security.

Our advice includes:

  • Mergers and acquisitions
  • Supplier reviews and analysis
  • Cash flow management plans
  • Risk management and asset recovery
  • Lease negotiations and reductions
  • Workforce improvements

 

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