Construction Alliance North East (CAN) chair Ken Parkin has hopes for a prosperous 2024 for the North East construction sector after hosting a Building Business Resilience event recently.
CAN organised the event for regional businesses after multiple contractors fell into administration or encountered difficulties through 2023 as the cost-of-living crisis deepened.
Partnering with James Lumb from Interpath Advisory and Jane Garvin from Ward Hadaway, the event welcomed almost 40 decision makers from key SME contractors and other organisations and served to provide practical, commercial and legal tips to navigate challenging times.
Parkin said the session was a real success, adding: “This is a subject that is not easy to talk about and it can make people uneasy, but it’s one that needs to be tackled head on. It was great to see representation of the built environment during the session so that the CAN team could understand in more detail the challenges that businesses are facing.”
Parkin went on to say: “If one person learnt one thing which helps them navigate stormy waters then the event was worth it. We wanted to focus on the steps that can be taken to prevent the worst happening and James and Jane did a great job explaining this as this work takes up most of their business however it doesn’t generally make the headlines.”
Lumb discussed the challenges construction firms face in understanding their own financial health and assessing risks up and down the supply chain. He said: “I’ve worked with a number of construction companies across the region and there are some common themes in how stakeholders like suppliers, subcontractors, customers and funders behave under pressure.
“One problem for businesses in the construction sector is that when things get difficult, they get difficult fast. Market noise affects the way suppliers behave and – because payments are not normally for completed work – customers can withhold to protect their own project finances. This means cash pressures can increase in very short time periods, sometimes days.”
He added: “A couple of big takeaways from the session are that – because of the cash cycle on contracts – a healthy bank balance does not always mean that a business is strong in the long term. The key to understanding the risks are good communication between teams on site and the finance team and keeping a good dialogue with customers and suppliers about the work they are doing and how their forecasts look.”
During the two-hour breakfast session at CECA North East’s headquarters in Team Valley, insight was also provided on dealing with company financial data, supply chain risk management, client risk management as well as business resilience healthcare checks.
Director at Carney CDM Caroline Morton said it was a really interesting session, adding: “Both James & Jane highlighted the importance of assessing risk and early warnings to be aware of.
“As a director of a construction consultancy, it’s important to understand the current climate and what is happening in our industry. Whilst this was directed at contractors rather than consultancies, the same lessons can be learnt from it and it’s important to understand where the risk and uncertainty lies.
“James highlighted areas to be aware of, such as the ‘rumour to cash cycle’ and reviewing if companies are winning work too quickly if they are pricing to win and if there is a reason behind that.”
To find out more about Construction Alliance North East, visit https://www.constructionalliancenortheast.co.uk
