COMMENT | North West housebuilders confident but face challenges

North West businesses are now the most optimistic they’ve been since the EU referendum and housebuilders are capitalising on the upturn in confidence. However, companies in the sector must meet new challenges head on if they are to achieve long-term growth, writes David Brigden of Lloyds Bank Commercial Banking.

Our latest Business in Britain report revealed that confidence among North West businesses has bounced back since the EU referendum result, with more than a quarter of companies expecting to increase sales, orders and profits over the next six months.

This seems to be true among developers across the region, with the Construction Industry Training Board forecasting a 2.5% rise in construction output in the North West over the next five years – way ahead of the UK average of 1.7%.

Despite this, our latest report into the housebuilding sector found that there were key issues causing concern for developers and their supply chains, including recruitment and cash flow pressures.

Accessing skills

For any industry to thrive, it’s essential that it has the capacity to complete new work, but accessing people with the right skills is causing issues for many residential developers across the region.

In fact, our latest housebuilding report found that more than a quarter of companies operating in the sector cited a lack of skilled construction workers as one of the main challenges facing their business. More than a fifth flagged a lack of talent coming through the education system as an issue.

Since the government triggered Article 50, many firms were also concerned about access to workers in the European Union, given that approximately 100,000 of the industry’s current workforce are from the continent.

But as it’s going to take at least two years to redefine our relationship with the EU, it’s important that companies don’t take a ‘wait and see approach’ to talent, instead exploring other strategies to access the skills they need.

One way of achieving this will be to concentrate on training, especially for employees in entry-level positions. Hearteningly, nearly a third of firms plan to make apprenticeships the main focus of their investment over the next five years.

Cash flow pressures

Access to skills isn’t the only issue that construction firms in the North West are facing, with the weak pound driving up inflation and affecting input costs for companies across the sector.

Although some firms have passed rising costs on to customers in the form of increased prices, construction businesses will have to keep a closer eye on their cash flow cycle to ensure that they have the capital needed to invest in new opportunities.

Many have started to explore alternative finance options as a way to manage working capital and fund growth, using invoice finance to release the cash tied up in unpaid invoices.

The housebuilding and construction sector is a key contributor to both the North West and UK economy, so it’s vital that businesses continue to thrive.

To do so effectively businesses need to address issues head on. Whether it’s implementing a new training scheme or releasing the capital they need to grow, our team of relationship managers can provide the tailored support they need. In turn this will help both the region, and the industry, to prosper.

Read the full Business in Britain report here.

• David Brigden is area director for real estate in the North West at Lloyds Bank Commercial Banking