Parm Bhangal is managing director of Bhangals Construction Consultants and My Build Estimate
During and following the pandemic, the construction industry was hit by a perfect storm of factors that it is struggling to bounce back from.
In fact, 2024 has seen 4,310 UK construction firms become insolvent, according to Building Cost Information Service figures up to the end of August. This is a 1.1 per cent increase compared with August 2023, and a 33.9 per cent increase on the pre-pandemic 2019 figures.
“I would advise construction firms and contractors to get ‘tender ready’”
In the post-pandemic world, individuals and businesses alike are waiting for big news announcements to be made before they decide on how they want to progress with planned construction projects. While this doesn’t stall everyone in the market, it does stall certain links in the supply chain.
Those leading commercial construction projects are not as hesitant but do have to carefully consider factors such as National Insurance and Corporation Tax in their forecasts and decision-making. After all, construction is a large investment. It is not like marketing, for example, which you can start and pause if the purse strings get tight.
Fast forward to 30 October and Labour delivered its first Budget in 14 years. Chancellor Rachel Reeves spoke in building analogies, pledging to “fix the foundations” and “rebuild Britain”.
There were some expected measures, such as the increase in National Insurance contributions from 13.8 to 15 per cent and increasing the National Living Wage by 6.7 per cent to £12.21 an hour, which will hit profit margins on projects that have already commenced. A rise in Capital Gains Tax from 10 to 18 per cent (lower rate) and 20 to 24 per cent (higher rate) will also put off property investors further.
Opportunities
However, there were also some surprises that could bring opportunities for the construction sector.
The chancellor has pledged £1.4bn to rebuild schools, with an additional £2.1bn for school maintenance to improve our “crumbling schools”. The government will also allocate £1bn to remove dangerous cladding on residential homes, following the Grenfell Tower Inquiry. A further £5bn will go towards increasing the supply of affordable homes, including creating new homes in Liverpool and Cambridge.
The chancellor says this investment will also “support small housebuilders”. Reeves also pledged to employ hundreds more planning officers to “get Britain building again” and to reduce Right to Buy discounts to reinvest in housing stock and building new homes.
So, will this latest Budget get Britain building again? I hope so. While it is not a super-positive Budget, it is a lot better than many of us were expecting and should bring some opportunities for the sector in 2025.
I would advise construction firms and contractors to get ‘tender ready’ in the final quarter of this year. There will be government contracts coming up to build these affordable homes and refurbish schools, so make sure you are in a position to bid for them when they come up. Start getting testimonials from customers, write up case studies, renew any certifications and memberships, and think about how you can stand out from the competition.
