In this article, Andy Scothern, founder of eCommonSense, explains to PBC Today the lasting impacts of Brexit on the construction industry
As one of the largest and most important sectors of the UK economy, the construction industry has emerged from the global Covid-19 pandemic relatively unscathed compared to many others, fully recovering from and exceeding pre-pandemic output levels in less than a year. Despite this, Brexit uncertainty continues to linger across all sub-sectors.
While it was a huge relief for construction businesses to see a trade deal agreed which ensured imports could continue without additional tariffs and quotas – other knock-on effects including complications with supply chain, labour shortages and the regulation of material costs have continued to impact the sector.
Movement and cost of materials
Similar to the impacts of Covid-19, construction SMEs have typically been less exposed to the possible effects of Brexit, generally speaking, conducting a large proportion of their work within the UK. However, surveyed in 2021, Aldermore Bank found that 28 per cent of UK construction SMEs’ monthly income was dependent on business with the EU, impacting nearly a third of construction businesses.
Despite this, the impact of Brexit on the construction industry has undoubtedly caused great disruptions to the trading of goods between the UK and the EU.
The construction industry’s primary source of imports, each year the EU supplies the UK with around £10bn worth of building material. However, more rigorous customs checks and additional post-Brexit paperwork requirements have resulted in bottlenecks at ports and major delays at transport hubs. With transport links unable to support the new regulations, supply chains have frequently been brought to a standstill, leaving many businesses no option but to swallow the costs of expensive building delays.
Throughout 2021, materials shortage blighted the construction industry – supply chain crises leading to huge lead times and skyrocketing prices on materials such as timber, creating havoc for construction companies and projects up and down the country. Government statistics show that material costs rose every month between September 2020 and September 2021.
Ongoing disruption and delays, combined with the effects of the war in Ukraine, means the construction sector is facing uncertain times. As a result, merchants are facing increasingly tight margins.
How embracing digitisation is beneficial for the industry
To combat this, solving the inefficiencies in the supply chain should be an area of significant focus. To succeed, the entire construction industry requires a digital transformation, linking together and connecting the websites, product databases and back-office systems of merchants, suppliers and even further downstream to construction companies.
Investments in improving sector-wide communication will not only enable rapid and accurate data exchange, allowing customers to make informed buying decisions, but it will also help improve inventory and delivery management – all whilst reducing the number of partially-filled delivery vehicles on the road.
One of the main concerns is that many merchants have invested a limited amount of money in digital transformation, as they are unsure if customers would favour online systems and are sceptical of the benefits. However, the digital revolution has gathered pace, spurred on by the ‘in-person’ limitations of the Covid-19 pandemic.
Equally, it stands to reason, as the buyer demographic evolves and new generations take over the market, changes in buying patterns are inevitable. In fact, millennials (people born between 1981-1994) now make up more than 73 per cent of B2B buyers with research showing that almost 60 per cent of millennials prefer digital channels such as vendor websites, for researching new products and services.
As demand grows, suppliers and merchants are increasingly steering toward the more efficient and sustainable option. Those that fail to invest and realise the potential of these digital solutions risk losing out to competitors and possibly fall foul of future legislation.
Short-term gain, or long-term inefficiency
While it’s tempting to seek quick fixes to the problems brought about by Brexit, over time this can impact overall business efficiency.
Looking at the bigger picture and widening your field of vision is crucial for managing every aspect of the business, whether it be finance, operations, health and safety or sales. To avoid making any knee-jerk decisions, insights from across the business, delivered in real-time, provides the necessary resource for well thought out and calculated decision-making. This is where centralised digital systems can help.
Breaking down the divides
A common issue for many builders merchants – data spread across different parts of the business and a lack of company wide visibility presents a number of complications. Without giving staff access to information across departments an organisation will struggle to grow, hiding insights that, if put to good use, could accelerate growth.
Everything from the management and cost of raw materials to quoting for jobs and agreeing contracts is dependent on numerous external factors. The impact of Brexit on the construction industry is undeniable in this area. While your buyers will know about materials costs as they rise daily, your sales team will understand demand – by combining this knowledge, and backing it up with data, it’s possible to make better decisions and plan for the long-term.
Business management software, including enterprise resource planning (ERP) solutions, can support communication across the business. However, the key to finding one that works is building a relationship with a partner whose solution was built with collaboration in mind, even beyond internal teams. This was a key driving force behind our supplier-merchant database product.
Three important steps to improve efficiency in a post Brexit construction industry
Deciding to invest in a digital business management system is an important step in the right direction for progression, and a huge part of this is finding the right solution for your business – one that will solve all your inefficiencies without replacing them with another.
There are a number of steps you can take to improve efficiency in a time of external complications.
Streamline costs to impact your bottom line
There’s no room for wastage in today’s competitive market. Use the data collated in your dashboard to improve your decision-making. While some investments might have paid off in the long-term, others could prove to have been ineffective.
A digital system can display trend-based data so it’s easy to visualise when KPIs have been hit, and where improvements need to be made, rather than making business-changing decisions based on guesswork.
2. Empower your employees with more control
Savvy business owners now understand that the days of micromanagement are over yet some managers are still nervous about handing over decision-making to employees. However, convincing your workforce to take this next step might be hard with a system that is clunky and slow.
Equally from a ‘people’ point of view, according to one PWC study, opportunities for career progression is the top priority for graduates considering a workplace, while over half said that an employer’s provision of state-of-the art technology was an important factor. While significant financial investment in cutting edge technology is unobtainable for many small to medium sized merchants, digital solutions are necessary to make your business attractive in an increasingly competitive labour market.
With business management technology, staff can access real-time data that can be used to add insight to everything they do. Tasks such as ordering, invoicing and more, are becoming a lot easier as the whole process is streamlined – meaning employees can spend more time in areas that need it. As well as being more productive, every department should see better decisions and increased productivity.
3. Use less, benefit more
In the current construction landscape, it’s never been more important to drive efficiency. If your sights are set on business growth, it could be tempting to opt for a quick expansion, only to then find out that the costs of upkeep are too high. The same is true of software. You might choose a system quickly to solve one problem, only to find that it lacks in other areas.
Cloud-based systems give you the ability to add various features to support your team and business with growth. Without the hassle of building a website from scratch, builders’ merchants can seamlessly integrate e-commerce to their ERP that automatically syncs product data.
Like any other business investment, seeking advice from an experienced partner is the best way to ensure that you choose the right system for your individual needs. They’ll also help to ensure the insight gained from data will help you gaze into the future using information from the past – an essential part of every long-term strategy.
One of the cornerstones of the economy, construction has played a pivotal role in the UK’s Covid-19 recovery, and while the industry is in a strong position to adapt to further external factors, such as Brexit and the war in Ukraine, technological advancements and the embrace of digitisation can only strengthen the sector’s resilience.
By working smart, looking ahead and focusing on efficiencies, builders merchants, and the construction industry as a whole, will be in the best possible health to fight off major disruptions.