Brexit uncertainty linked to contraction of UK construction sector

Brexit uncertainty linked to contraction of UK construction sector

This is a blow to the construction industry with both output and new orders declining to their largest extent since the first quarter of 2018. This weakness has also affected the hiring sector as employment numbers for May fell at their sharpest rate for more than six years.

May’s figures from the IHS Markit/CIPS construction Purchasing Managers’ Index (PMI) fell to 48.6, the lowest reading since March 2018, when the country was in the grip of an unusually cold winter. This has fallen from 50.5 in April and has surprised economists who were expecting 50.5 for May too. Any figure above 50 indicates growth in the sector while figures below that represents contraction. This is also the third time that the sector has contracted in the past four months.
The caution that has been affecting the retail and manufacturing sectors has spread to building projects with only housebuilding showing growth, and even that is at a softer rate than last year’s average. The commercial building sector has been the hardest hit with the steepest fall since September 2017. Civil engineering did not fare much better and May’s fall signifies the longest period of decline since the first half of 2013.
This is a blow to the construction industry with both output and new orders declining to their largest extent since the first quarter of 2018. This weakness has also affected the hiring sector as employment numbers for May fell at their sharpest rate for more than six years. This reduced workload and continuing contraction has been linked to the ongoing political and economic uncertainty caused by Brexit, clients are delaying major new projects until there is a clearer picture around dates and what, if any, deal the UK secures with the EU.
Tim Moore, an associate director of IHS Markit, said: “May data reveals another setback for the UK construction sector as output and new orders both declined to the greatest extent since the first quarter of 2018. Survey respondents attributed lower workloads to ongoing political and economic uncertainty, which has led to widespread delays with spending decisions and encouraged risk aversion among clients”.
None of this news does anything to allay the fears of the thousands of SMEs who currently rely on the large construction firms for their work. It also causes a sense of unease for some SMEs who worry about staying liquid in such a tough market. These fears are all perfectly justified, especially after seeing the collapse of the construction giant Carillion earlier this year. Now more than ever it is important for firms to be pro-active around managing their finances. The biggest cause of business failure for SMEs is poor cash management and taking a pro-active stance around invoice payment is one way to offset this.
Firms working with a trusted partner to manage their credit control systems can free up time and resources that can be more effectively be put to use in other areas of the business. Being able to more accurately forecast cash flow also allows for greater confidence in investment in new products, equipment or research.
At Daniels Silverman we are the trusted partner for large global and UK organisations as well as SMEs. We have a proven expertise and an excellent track record in managing the credit control of companies from a wide range of sectors, including construction. We work alongside your business and understand the value of both your reputation and your relationship with your clients. We know that getting paid should never cost you a valued customer and so we act on your behalf to send friendly and polite reminders when invoices come due. The payments are made directly to your account and we charge a flat monthly fee instead of commission. This allows you to control exactly how much you are spending based on the number of invoices you would like collecting. We provide a same day service, so you always know exactly where your accounts are up to, helping you to keep your systems accurate.
If you are wasting time that could be better spent on your business chasing invoices, why not partner with an established, trusted and ethical firm to do it for you? If you think this is something that would benefit your business and offer more stability in uncertain times, please contact us today, one of our business development team would be happy to find out about your business and see how we can help to support you.