The construction industry is facing a major change right now. The disruption of the COVID pandemic has increased the challenges that any construction company might face. Knowing these potential issues can ensure that upper management is better prepared to face them. Here are some that might be obstacles for many companies in the future as the world recovers.
Lack Of Skills
One of the big issues that many companies will face will be the lack of people with the right skills. Construction work may have a negative reputation as manual labor, but many modern construction techniques and safety requirements require training and skill. Without them, the product is substandard work. Usually, construction workers learn on the job on easy projects while also getting some formal training at vocational schools.
The problem is that the COVID pandemic shut down these potential sources of skills. While the work was stopped, this was not a problem. But with construction getting back into action, this can result in a worker shortage. While some construction companies require an employee to pass a CSCS test, some operations might end up suspending that requirement because of the lack of manpower.
Another issue that will cause construction companies trouble is Brexit. While it may seem that it won’t affect anything since companies will be operating in the UK, some things can cause problems. First, there is the issue of construction materials. A lot of the materials that UK companies need to build are sourced from overseas because they were affordable. But with Brexit, tariffs and taxes are now adding to the expense. Besides that, construction projects may also be fewer. This is because some of the funding sources like European banks will not be available to customers. Without funds, then there will be fewer people willing to start major building projects.
VAT Charges And Other Taxes
Construction company budgets are very tight. Companies often have to operate with razor-thin margins to stay competitive. Tax is an issue that negatively affects company cash flows. One problem that comes up this year and in 2022 is the VAT charges that were deferred during the COVID pandemic. The deferral was a form of tax relief, but the government will soon be collecting it. If a company can’t pay it in full, they will need to set up a payment scheme. They also might need to apply for additional tax relief to ensure that their cash flow stays positive in the coming years.
There is also the problem of creating a backlog. Modern construction companies usually have a backlog of projects that they build up. This is to ensure that they have consistent work. When one building project is over, they can then smoothly move on to the next. It lessens downtime and keeps the company productive. Additionally, modern planning processes usually have projects being done in stages so that the entire company is doing work, from the architects to the electricians. However, the pandemic put a freeze on projects, and it is slow to start up again. There may come a time when a company might have no backlog and have to be idle for a period. Companies need to be more aggressive in looking for potential clients to work with.
IR35 is the UK’s tax avoidance scheme. This ensures that workers are properly taxed. In recent years, many employees have been “disguising” themselves so that they can avoid paying their proper taxes. The new IR35 rules now pass on the responsibility of determining the employment status of any contractor and personal service companies (PSC). This affects construction companies a lot since it is very easy to slip in employees without paying the proper taxes. Now that the companies are responsible for it, there needs to be a review of all employees to ensure that everyone is paying their proper taxes.
Ecological concerns are also a prime focus for the near future. Sustainable construction practices and construction materials are what people want. However, the problem is that they can be expensive. The initial training and implementation for practices can stretch the budget. Additionally, sustainable materials have a higher price tag. But the increasing demand for green buildings will force many construction companies to adapt.
Like all businesses, construction companies have to worry about the future. The challenges above can make it difficult for them, but the right preparation can help ensure a company can survive. It can be difficult to do so, but being aware of what they face can make it easier for company owners to handle them.