Rutherford Cross recently held the latest webinar in our Sector Spotlight series focused on the Construction Sector. The virtual event was attended by a small group of Senior Finance professionals from the industry and featured the insights and expertise of Stuart Dougal, Director at Onside Advisory and Alistair McAlinden, Interpath Advisory’s Managing Director. Rutherford Cross Director, Hazel Wynn shares some highlights of the discussion points from the event.
The session kicked off with a general discussion around how the sector is performing; from a housebuilder perspective, it was noted that pressures on supply chain and labour have eased over the last few months. Certainly, the overall feeling is that we are in a better place now than 12 months ago, when the sector was facing a real pressure point. The discussion highlighted impacts related to the mini budget in September 2022, with a slowdown in reservation rates as negative factors took hold, including interest rate rises. However, in the year-to-date, the sentiment was more positive. Across wider Construction, labour shortage pressure seems to have eased, albeit there is still some way to go. Supply chains have also adapted to give greater availability of key materials, even though some price inflation persists.
Across the board, contract start date delays and cost pressures persist. With challenges in passing material, overhead and labour cost increases to the end customer, profit margins remain tight. Over 2022, it had been very difficult to hold certain subcontractors to tender prices for anything longer than a couple of months. However, recently there has been some improvement with fixed prices being offered for an extended period. Overall, the sector as a whole has been very resilient and able to cope in a hyperinflation environment.
The discussion moved on to subcontractors and cashflow, specifically the continuing importance of regular cash forecasting. Some subcontractors are being affected by Pay Less Notices, and project delays have made it more challenging to accurately forecast income. The group noted that certain main contractors are reducing the number of subcontractors they work with, in order to build a smaller pool of trusted relationships and then invest in supporting those subcontractors.
In summary, this was another highly informative hour with lots of interesting discussion points. Many thanks again to our speakers and all those who attended the event!
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