Rutherford Cross Sector Spotlight – Construction

Rutherford Cross recently hosted a virtual discussion attended by a group of Senior Finance Professionals from the Scottish Construction Industry. We were fortunate to welcome Stuart Dougal, Alan Flower, and Jim Findlay from KPMG who gave us their insight on our key discussion points.

The session focused on; the impact of the Job Retention Scheme (JRS), preparing for the new IR35 legislation, how to ensure effective cash control, and discussion around the outlook in general for the Construction sector. Here we share some key takeaways from the session.


The Coronavirus Job Retention Scheme

There has been a significant uptake of the Job Retention Scheme by employers in the Construction sector. Some businesses have been asked to revisit claims by HMRC, which has proven to be an in-depth process that requires a significant time commitment for Finance departments.

The scheme has been extended until September, which could provide a lifeline to businesses severely affected by the pandemic. Some businesses which made use of the scheme have chosen to repay the loans as they were not as badly impacted as they had thought. Other businesses planning to pay dividends to shareholders have chosen to pay back furlough as they felt it was morally right to do so.

The Impact of IR35

The IR35 legislation changes that impacts ‘off-payroll’ workers is scheduled to come into effect in the private sector from 6th April 2021. The responsibility on determining whether a role sits inside or outside IR35 will shift from the Contractor to the end client company and / or third-party agent. Typically, a Status Determination Statement (SDS) will be provided to the Contractor by the end client using the HMRC’s Check Employment Status for Tax (CEST) Tool. As the construction sector works with a number of contractors there is general consensus there is progress to me made in order ensure compliance in this area over the next few months.

Effective Cash Control

Many businesses had not experienced cash pressures before the pandemic and were not properly set up to deal with them when the pandemic hit. Typically, cash forecasts have insufficient detail and granularity, however it is important to get the balance right, managing time spent versus the benefit of increasing levels of information provided.

The benefits of creating a forecast are only realised when it is monitored closely. Long-term forecasting helps with strategic cash management.  A rolling 13-week cashflow forecast can help with operational cash management and identify imminent liquidity issues.

Construction Sector Outlook

Our panel commented on how the housebuilding sector within construction is booming, which has fed down the chain, keeping many contractors busy.  Facilities Management is also an area that has been kept busy with the reconfiguration of offices to accommodate social distancing and a more flexible way of working as organisations consider new, more flexible ways of working in the post-pandemic era.

There have been some short-term challenges facing the sector, mainly concerning material shortages and supply chains, with some suppliers being forced to turn away new business in order to fulfil orders for existing customers.

As the result of a general slow-down, larger contractors trying to bid for smaller contracts has squeezed the margin at both ends, with smaller contractors also been forced to compete for jobs that fall into the ‘middle ground’.

To conclude, it is clear that the Construction sector was in a robust position in 2020 once full lockdown was lifted, and it is likely to return to this position once the current lockdown ends. New players continue to join the sector indicating room for growth. However, a real focus needs to be on the robustness of the construction supply chain in order for the industry to continue to recover post-pandemic.

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