Confidence in UK construction sector grows

Construction in London

A report published on Tuesday by British full service law firm Irwin Mitchell reveals that nearly 70% of UK construction firms have grown more optimistic about future prospects over the last year.

However Irwin Mitchell’s survey of over 600 companies indicates that there are also growing concerns amongst senior decision makers about the cost of labour, with 61% of construction firms expecting wages to rise over the course of 2014. This is said to be due to a shortage of skills in the construction industry.

The law firm’s report also reveals that main contractors are seeing increases in tender return prices as a result of inflation in subcontractor prices, following a long period of flat prices.

There are also significant differences in optimism between UK regions. Wales had the lowest level of confidence recorded at 62%; optimism in Northern Ireland was 75%, while the figure for Scotland was 64%. Within England, the East Midlands had the highest level of business confidence at 84.6%, while the North West had the lowest figure of 64.7%.

Commenting on the survey results, David Parton, Construction Partner at Irwin Mitchell, said: “On the whole, these results reflect an improving construction sector. Not only are we seeing the impact of strong demand for house building, in the London market, for example, the sector is being buoyed by mid to high end residential developments, offices, commercial space and logistics.

“The key now is to ensure that this positivity is sustained into the longer term. The opportunities exist but there are threats and it is vital that companies deal with them effectively. The availability of materials is a concern, but with the majority of firms expecting wages to increase during the rest of the year, it’s clear that the lack of skilled workers could also hamper future growth.”

Steven Bate, construction litigation specialist and partner at Irwin Mitchell, also stated: “It is vital that UK businesses take full advantage of this market optimism whilst ensuring that they are fully protected. There is a tendency for businesses to get on with the work immediately after a contract has been awarded, but it is important to ensure that they are protected via their contract. As work opportunities increase for construction companies, we expect that businesses will see extra pressure on their cash flow due to a lag in getting paid under most standard forms and bespoke construction contracts, whilst still needing to pay one’s supply chain. This can however be protected via robust contract drafting and negotiation and debt recovery services.”

Irwin Mitchell is approved as an Alternative Business Structure (ABS) and employs more than 2,200 people in nine UK offices.

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