What happened in the building industry this year?

The phrase “safe as houses” used to be pretty self explanatory but for construction companies and housebuilders the past 12 months have been anything but. 

We’ve previously talked about the elevated risk of insolvencies within the construction industry because of the unique nature of the sector which has exacerbated some cases. 

Up to October 2019, a record high 343 housebuilders became insolvent, which is an increase of 67% over the past three years.

June saw the worst industry performance figures for a decade while stagnating house prices especially in London and the South East combined with rising labour costs and materials becoming more expensive. 

Uncertainty around Brexit increased the cost of raw materials and the departure of hundreds of Eastern European workers have pushed up wages. 

Building resistance to challenges

Larger builders have been able to enjoy economies of scale along with historically low interest rates, a competitive mortgage market and the Help to Buy scheme, smaller builders are unable to take advantage and are more vulnerable as a result. 

Smaller housebuilders are more likely to develop smaller plots of land and build on brownfield sites along with delivering a diverse selection of housing stock whereas larger builders concentrate more on bigger developments and projects. 

Smaller contractors will also benefit from improved protection against late payments coming into force from September which we covered in an earlier blog post.

A new government being elected may bring benefit to the industry if commits to increasing the public housing supply but nobody knows what the construction industry landscape looks like after brexit  and this is hampering investment including projects that require higher initial investment for a longer term rate of return.

Another year of uncertainty beckons and nobody can be sure what the overarching trends will be for builders. 

No matter what the future holds for them or your company, we’re always here to help. We help distressed companies back to safety and make good companies even better – no matter what industry they’re in.