The future looks bright for construction SMEs

With Brexit leaving many UK businesses facing an uncertain future, it could be assumed that SMEs in the construction industry might be fairly pessimistic about their future prospects – but our latest research has revealed quite the opposite.

We recently commissioned independent survey consultants Censuswide to speak to over 500 of our small to medium-sized business members, with the aim of getting their views on the opportunities, challenges and changes facing SMEs in the construction sector. And while they recognised that there are some key challenges for construction SMEs to overcome, the majority were optimistic about future prospects and keen to embrace new technologies and change.

We were encouraged by these findings – it’s great to hear that SMEs are positive about moving forward, and have realistic plans to do so. Here’s more on what SMEs had to say about…

Building on opportunities

When it comes to the immediate future, 74% of those we spoke to said that they’re optimistic about their organisation’s success over the next two years. Only 11% of respondents felt pessimistic about the near future.

There was a real understanding of the value of good work in growing their business, with three quarters expecting future opportunities to come from their reputation for producing high quality work. With studies showing that it costs over five times more to acquire a new client than to make a sale to an existing client, it’s important that construction SMEs focus on establishing long-term relationships with clients.

Around a fifth (21%) of those surveyed expect the continued growth in the housebuilding sector to be an opportunity for their business. The government outlined plans to support SME housebuilders in their 2017 Housing White Paper, so it’s perhaps unsurprising that construction SMEs have identified housebuilding as an area of growth. Many also expect to see more opportunities arise for SMEs in public procurement, with over a third (34%) anticipating a Government move towards breaking up huge Carillion-like operations to provide more contracts for SMEs.

Overcoming challenges

While many SMEs were optimistic about their future, they were also realistic about the challenges they will need to conquer to succeed.

Among those that were negative about the immediate future, over half (60%) saw the biggest threat to their business as the ongoing squeeze on price margins. Many within the industry will have felt the impact of this issue in recent years, as material costs have risen substantially, mainly due to the depreciation of Sterling since the referendum.

They also saw the skills shortage within construction as a challenge – with an aging workforce, and a failure to train young people, 53% of those surveyed believed that a lack of skilled people could threaten their business growth. Over a third of respondents (34%) cited difficult payment terms and suppliers/buyers financial security as a business challenge – payment delays often hit SMEs the hardest, so this can be a real concern for them.

There was a generally negative view on the impact of Brexit on the construction sector – just 22% of respondents saw it as an opportunity for their business, but most saw Brexit as a threat, due to the difficult economic conditions and a further shortage of skilled labour it could cause.

Embracing change

Promisingly, most of the SMEs we spoke to came across as forward-thinking and ready to adapt to new working practices, which should help them to overcome the challenges they anticipate.

Many realise that changes are coming, and that they will need to engage with new technology – in fact, 17% said that they have already introduced new innovations that have attracted new business. A number of those surveyed said that they are investing in IT and training staff, with many (32%) believing that they will become increasingly reliant on software to facilitate Building Information Modelling (BIM).

Over a third (36%) think that there will be shift towards offsite manufacturing, and that technology will replace skilled/semi-skilled labour. This view reflects the fact that the Government is starting to recognise the potential for offsite, with support provided for offsite construction in the Housing White Paper after increasing pressure from various sources for the Government to embrace changing construction methods.

Securing a successful future

It’s a really encouraging sign for the health of construction SMEs moving forward that many are identifying opportunities and adapting their ways of working to ensure that they can effectively meet any future challenges.

If you’re working within a construction SME, find out more about how Constructionline can help your business to achieve by visiting our SME guidance area.