There may be trouble ahead… but opportunities too

If the last recession is anything to go by, tough times in 2023 will offer plenty of opportunities for smaller and more agile construction firms, according to Hudson Contract.

Managing director Ian Anfield said: “From 2007 to 2009, the trade press was filled with stories about third generation, medium-sized regional contractors going out of business. At the same time, we were busy signing up the new companies which had set up and were growing to fill the void. It felt like a real changing of the guard and it has been great to be involved with the success of those companies since.  

“It’s a bit different this time but with so many uncertainties ahead, the winners will be the agile companies with the best grasp of contractual obligations, pricing discipline, low overheads and a flexible workforce. The losers will be the top companies which are slaves to turnover to feed their overheads.’’

Commenting on the outlook for the construction industry, Ian said:

“In the residential market, we are seeing a lot more operatives working on high-rise concrete frame apartment buildings for built-to-rent schemes funded by private equity rather than traditional housebuilders. It will be interesting to see how those investors view the risk of recession and whether they have the guts to carry on starting new schemes.

“A number of the big housebuilders have said they are slowing down development and the opening of new sites and are expecting fewer completions. This suggests they have decided to protect their margins rather than maintain their turnovers. They will continue to slow down construction activity until demand forces house price inflation back up above build-cost inflation.

“Large infrastructure schemes like HS2 and Hinkley Point will reach peak labour requirements in the next 12-24 months and national road-building schemes should take up some slack in the sector. However there are still big issues with planning rules and funding could yet be pulled from schemes already passed for construction, such as the TransPennine route upgrade, if the economy continues to tighten.

“Environmental campaigners have yet again delayed the start of a £200m bypass project in the North West. I was the construction manager on the same project for Mowlem in 2006 when it was pulled just as we were planning to start on site because of out-of-date traffic pollution data. It seems Swampy-style protestors are no longer camping in trees and hiding in tunnels: they have found yielding a pen and paying good lawyers far more effective.”

Founded in 1996, Hudson Contract is the UK’s largest provider of tax status and employment contract services to the construction industry with annual revenues of £2 billion and a client base of 2,600 construction SMEs.

Ian added: “During the previous downturn, some construction firms got spooked and jumped into long-term fixed price contracts thinking that would secure them. But they ended up getting burnt because even though the industry was in recession there was still material and labour inflation.

“We always advise clients to make sure they are incredibly careful about the agreements they make up and down their supply chains. We offer due diligence audits and contractual advice to those who ask for it. Having Hudson Contract in their corner to deal with tax and employment law helps entrepreneurs to flourish.”