The Ever-Changing Economic Landscape
As decades pass working in the UK, the nature of the boom and bust cycle continues to evolve. From high interest rates to low, and from slow growth to unsustainable surges, the economic tides shift constantly. Yet, one thing seems to remain the same: the construction industry persists as the bellwether of the economy.
It doesn’t seem to matter whether the individual business is a good one or not, all of them are affected by the incoming and outgoing tide of the economy and the global supply chain.
With battles raging in Ukraine/Russia and the Middle East looking like a tinder box of conflict, and the cost of supply increasing with no certainty, you might be forgiven for thinking this may become more of a problem for the whole economy rather than just construction.
Contracts and Certainty: A fragile balance
But unlike a lot of the economy, the construction industry is bound by a contractual structure that has always appeared to provide some certainty for clients, although arguably it never did. Good businesses could increase their turnover on contracts with some “value-added” modifications that made both the company and the customer happy.
The uncertainty of supply and the cost of delivering the contract has blighted the industry, causing some notable failures. In the industry’s reasonable attempt to provide some certainty to its clients, it has found itself on the losing side of the contract rather than mutual winners with the client. Costs have been spiralling upwards and deadlines missed due to the supply chain, all causing damage to the industry.
Environmental Pressures in 2024
Another problem for the construction industry in 2024, has been the increasing pressure to comply with environmental regulations and standards. The UK government has set ambitious targets to reduce greenhouse gas emissions and achieve net-zero carbon by 2050, which requires the construction industry to adopt more sustainable practices and materials. The industry also has to deal with the impacts of climate change, such as extreme weather events, flooding, and rising sea levels, which pose risks to the safety and durability of buildings and infrastructure. The construction industry has to invest in innovation and adaptation to meet these challenges, but this may entail higher costs and lower margins.
However, the focus on local and sustainable supply has in certain instances meant that the issues around cost and the supply chain are mitigated. All clouds…
The role of Government planning
The current UK government seems set on building. That can only be a good thing for the industry if that filters down through planning. Of course, planning is devolved by country and Wales has, as an example, been keen to develop its own agenda in this regard. However, unless something changes, the amount of capital expenditure is set to decrease in Wales over the next few years by at least 5%. The devolved governments must be looking to private business to help spark the economy and that is most likely to happen if the planning process in the devolved countries are straightforward and transparent. Why else would a developer risk the time and expense unless there was a critical need in the area?
Conclusion
I thought I would end on a positive note. But of course I haven’t. Construction is a difficult industry and not for the faint-hearted. The risk in construction can often be more difficult to manage than in many other businesses. Without it, even as a small island in the Atlantic, we will be in trouble so we must find ways of supporting the industry.
I support the industry by providing timely advice to clients as someone that has the experience of someone who has worked with the industry for years, but at the same time I am glad that it remains able to do the hard work when it matters.
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