Over the last 6 months the construction industry has enjoyed a long and fast growth in the number of new projects started and with a further increase of 6% in the coming months it’s going to be a busy and prosperous start to 2014. However, conditions are getting tougher for building contractors, already wafer thin profit margins are being squeezed even further due to the increasing number of companies tendering for projects.
Tender prices during the last 6 months of 2013 have continued to rise but the price of materials and labour have increased at a more dramatic rate, explaining how profit margins on projects are continuing to decrease. Times are getting even tougher for contractors, as well as cut profit margins due to competition; late payments are also becoming a real issue with over 19% of companies receiving payment between 60 – 90 days after it’s due.
Current cash flow problems are affecting main contractors as well as smaller companies due to them continuing to take on work at low margins. The issue of late payments has been recognised by contractors, with many major companies introducing early payment schemes and finance options. However, the recent increase in work is shifting the balance of power towards the subcontractor, with the industry losing 20% of its sub contractors between 2008-2012 they are now in high demand. As the volume of work and confidence from subcontractors continues to rise, they will begin to insist of prompt payment terms.
With competition increasing and prices being cut when tendering for new work it is important that you get your costing right for materials and also labour on site. By taking out a sole supplier agreement with Farsight for your labour supply in 2014, there are a few key benefits that we can offer, the main advantage is having a dedicated consultant who you can contact 24/7 and will get to learn about your requirements and the current jobs you have on. Other benefits include only having one invoice and timesheet to do per week.
Posted 3rd March 2015