Nearly two thirds of East Midlands and over a third of West Midlands construction firms are concerned they won’t be able to trade into 2025, according to a new report from business advisory firm FRP.
Of the senior decision makers surveyed across the Midlands construction sector, 64% of East Midlands firms and 38% of West Midlands firms aren’t confident that they will be able to trade through the next 12 months. The East Midlands are the most pessimistic part of the UK surveyed when it came to construction businesses’ prospects.
FRP’s data found that the regions’ businesses were finding it increasingly difficult to access funding, with a split field across the Midlands. While nearly two thirds (64%) of East Midlands businesses say they found it more difficult to secure necessary backing last year than the year before, only 38% of businesses in the West Midlands say the same.
Tax burdens were also a concern for businesses in both the East and West Midlands, with nearly half (48%) and half (50%) of firms, respectively, admitting they will struggle to pay their tax liabilities or any outstanding tax in full this year.
Meanwhile, 76% of East Midlands and 62% of West Midlands firms flag that political uncertainty in an election year is either causing them to delay investments or prompting clients to postpone commissioning new work.
East Midlands firms surveyed also say that factors such as supply chain disruption (18%) and the insolvency of sub-contractors or customers (18%) are likely to damage their prospects, while West Midlands firms cite factors like high interest rates (20%) and weak end-consumer demand (18%).
In response to the headwinds they face, a focus of East Midlands businesses will be renegotiating existing contracts (28% vs. 16% of West Midlands firms), while West Midlands firms will be looking to change suppliers to cheaper alternatives (36% vs. 22% of East Midlands firms).
Another split field across the Midlands was seen in revenue and profitability expectations. One in six (16%) East Midlands firms expect profitability to increase over the coming year, compared to last year, against 36% of West Midlands businesses that feel the same.
Similarly, just over one in nine (12%) East Midlands businesses expect to see revenue increase year-on-year, compared to 42% of their counterparts in the West.
Nathan Jones, Restructuring Advisory Partner at FRP in Leicester, said: “The results across the Midlands are concerning, but particularly so in the East.
“It’s possible that what we’re seeing here in terms of splits in trading optimism, and revenue and profitability expectations are the knock-on effects of the decision to cancel the eastern leg of HS2, which was particularly poorly received in the region.
“There are certainly a growing number of reasons for optimism, with green shoots beginning to show in the form of easing inflation and predicted interest rates cuts. Businesses in the region remain acutely aware of the threat of further supply chain disruption, however.
“Steps such as renegotiating contracts and shoring up local supply chains will be key for those looking to weather future headwinds.”
Across the UK, an average of 36% of firms surveyed say they lack confidence in their ability to trade over the next 12 months.
The North West (24%) follows the South West (20%) as the second-most optimistic construction sector, although still hosts a sizeable proportion of businesses fearing for their future, while the North East (45%) follows the East Midlands (64%) in reporting the largest proportion of firms pessimistic about their prospects.
