Four key drivers of transformation in the construction industry
CONSTRUCTION FUNDING
Lee Rhodes , Commercial Director for Asset Finance
The construction industry is undergoing significant shifts driven by sustainability , economic pressures , supply chain challenges , and the need for innovation . Whilst challenging , these changes also present opportunities for companies to evolve , improve operational resilience , and drive growth . Here Lee Rhodes , Commercial Director for Asset Finance , considers the results of our latest SME Growth Index * and discusses four key ways the industry could transform .
1 . Embracing sustainability and ‘ green ’ practices
Sustainability is increasingly important in construction , yet many companies have been slow to prioritise it . Currently , only one in five firms ( 22 %) measure and reduce their carbon footprint , and only a quarter ( 26 %) have adjusted their supply chains for sustainability . However , this does leave a significant opportunity for growth in ‘ green ’ construction practices .
As environmental regulations tighten and demand for eco-friendly buildings rises , firms that invest in sustainable materials , energy-efficient technologies , and wastereduction strategies will be better positioned to meet future demands . This shift can also improve market competitiveness , as clients and stakeholders are placing greater emphasis on sustainability in their projects and supply chains .
Adopting ‘ greener ’ practices is not only good practice , but also helps firms comply with regulations and opens the door to new business opportunities . By collaborating with suppliers to source sustainable materials and using technologies that enhance energy efficiency , construction companies can lead the way in decarbonisation and set themselves apart in the marketplace .
2 . Strengthening supply chain resilience
High inflation , rising energy costs , and supply chain disruptions have had a significant impact on the industry with project delays and increased operational costs .
The reliance on international suppliers has exposed vulnerabilities in supply chains , especially during periods of economic uncertainty . To mitigate these risks , construction companies are increasingly looking at sourcing materials locally and investing in regional production capabilities . This approach not only makes supply chains shorter and more reliable , but also reduces the risks associated with shifting international prices and shipping delays and can reduce carbon footprints .
3 . Tackling late payments to improve cash flow
Late payments remain a major hurdle for many , directly affecting cash flow and limiting growth potential . The total value of outstanding late payments for an average construction SME is £ 75,200 and 55 % of SMEs in the construction industry say the time they spend chasing late payments is ever increasing . For firms facing these challenges , delayed payments hinder their ability to invest in equipment , expand services , and take on larger projects .
Addressing late payments is critical for unlocking further growth in the sector . Improved cash flow allows businesses to invest more confidently in innovation , such as new technologies or diversified services . Freeing up management time from chasing payments can enable companies to focus on core activities such as upskilling their workforce and this , in turn , can drive growth and productivity across the industry .
4 . Expanding through infrastructure development and innovation
Despite ongoing challenges , the construction industry has shown resilience , with many businesses reporting growth in revenue , workforce size , and client base . However , this growth remains below the national average , suggesting that there is room for further expansion , particularly in infrastructure development .
As demand for housing and public infrastructure grows , companies will have more opportunities to take on largescale projects . For example , housing demand , particularly in urban areas , is expected to rise , creating new opportunities for firms involved in residential construction .
At the same time , companies should embrace innovation and digital tools to stay competitive , positioning themselves for longer-term growth . Technologies like building information modelling ( BIM ), automation , and advanced project management tools can help streamline processes , improve accuracy , and reduce costs .
In summary
The construction industry is clearly set for transformation , driven by the need for sustainability , economic resilience , and technological innovation . By embracing sustainable practices , strengthening supply chains , improving payment processes , and focusing on infrastructure and innovation , companies can position themselves for success in an evolving market . These shifts will not only help the industry overcome current challenges but also open up new growth opportunities in the years ahead .
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T & Cs will apply , subject to status and affordability . Any asset used as security may be at risk if you do not repay any debt secured on it . * Research conducted by Opinium on behalf of Aldermore between 16 – 29 April 2024 , covering 68 senior decisionmakers in the Construction & Building Materials sector .
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