Could Post-Brexit Price Hikes Put the Brakes on the UK’s Ambitious Building Plans?

Posted by Construction Industry News Magazine on 29th March 2021 -

Amid the uncertainty of Covid-19, the construction industry has been gearing up to play a leading role in the UK’s economic recovery. However, a perfect storm caused by the pandemic and the end of the Brexit transition period introduced delays, a shortage of shipping containers and red tape that could dramatically push up the price of materials – potentially derailing the recovery. Here, Carol Massay, head of construction at the Access Group, explores how software can help track actual costs against budgets to ensure projects remain on track, identify inefficiencies to bring down overall spend and ensure project completion dates can continue to be fulfilled.

 

The Federation of Master Builders’ State of Trade Survey, conducted in Q4 of 2020, found that 82% of respondents had noticed material price increases. However, just 29% of builders had increased the prices they charge for work, down from 37% in Q3, suggesting more small firms are taking the hit as their own expenditure rises.

This issue is made worse by new Brexit red tape, with many UK businesses having grown to rely on the free movement of construction materials and products between EU Member States. Previously, goods could be imported without the imposition of tariffs or customs formalities, however one recent survey found that 58% of UK firms are now experiencing longer border delays due to Brexit. Many are also concerned the situation will only worsen when new import requirements are introduced in April. 

Under the UK’s trade agreement with the EU, suppliers don’t have to pay tariffs on importing goods but many parts and materials – including plaster, cement and timber – must be declared under Rules of Origin, potentially increasing admin and costs, as well as potential disagreements between employers and contractors as to who should bear the brunt of this additional spend.

It’s highly unlikely, as the industry grapples with the impact of Covid-19 and Brexit repercussions, that prices will stabilise any time soon, so putting in place specialist software can help ensure those already working to tight margins can continue to deliver existing projects on time and within budget.

Customer communication

Securing new business wins and contract renewals is hugely important – especially with the government planning a number of large scale projects to help the economy bounce back.

With this in mind, effective customer communication has never been so important for those looking to bolster existing client relationships, as well as tender for new contracts. Via a central system, you can access key customer data in just a few seconds – saving trawling through files or unconnected documents.

With a combined ERP and CRM system, you can easily access contact data, attach notes, documents and assign actions to other system users – allowing you to introduce a more strategic approach to marketing, as well as identifying areas where service could be improved or commercial relationships could be strengthened.

Keeping track of spend

Without specialist software in place, it can be difficult to pinpoint exactly when costs begin to spiral, potentially jeopardising the overall profitability and success of the project, as well as impacting your overall business performance.

Viewed as the ‘universal workspace’ of the project, the cost value reconciliation (CVR) process means any overspend or under recovery can immediately be dealt with, preventing a snowball effect. As well as identifying concerning trends, you can also prepare monthly management and period end accounts, using reliable CVR summary data.

A fully digitised CVR process will help project teams better track monthly expenditure and revenue, ensuring project cash flow forecasting information is easily shared with the finance director who is ultimately responsible for the financial stability of the company.

Depending on the size of the project, you may be required to capture costs at standard levels such as labour, plant, material, subcontractor and overheads. However, some specialist projects may request additional levels of detail assigned to individual cost transactions, also referred to as element or work breakdown structure (WBS).

Robust reporting and analytics

With management teams having to cope with rising costs and potential border delays, access to accurate and up-to-date analytics can help inform smarter decision making.

Dashboards give businesses full visibility of trends, based on actual and real-time data, providing an accurate and up-to-date representation of the project. The capability to integrate client, supplier, sub-contractor and consultants financial information will also save hours of administrative work, allowing you to focus more on revenue generating activities. 

The production of weekly and monthly reports will also help identify what is performing well and instantly raise any concerning trends. In an attempt to prevent over-spend, finance and commercial teams increasingly expect to access key information or reports in real time, so it’s important your system is intuitive and easy to use.

With mobile apps, staff working on-site can instantly access and submit key data to the ERP and finance system, rather than waiting until they are back in the office. This not only speeds up the process, it also minimises the chance of error or confusion.

While many challenges lie ahead for the sector, construction firms can still play a leading role in the UK’s economic recovery. Little can be done about the risk of border delays, the shortage of shipping containers or even the Brexit red tape, however with technology businesses can put in place a number of measures to bolster their own operation and mitigate against disruption.