From multinationals to startups and family firms, the UK construction industry is a powerhouse for investment and returns, with all players looking to expand their share of the construction economy.
However, the smaller the business, the greater the challenge to command and grow profits due to the hyper-competitive nature of the market. Any business plans or decisions can be impacted by government whims (HS2, stamp duty, tariffs, local planning permission headaches, etc). Then there’s highly volatile material costs, uncertain hiring and work trends, and the likelihood of more red tape.
To thrive in this tortured environment, construction firms must knuckle down and master the basics of business efficiency. And, adopt innovative financial strategies to improve their profits, and enable them to focus on future success.
We highlight four key strategies that can help UK construction businesses build sustainable profits, and ensure they can react to changing market conditions faster.
Improve Your Cost Management
Whatever the business type, effective cost control is a foundation of good management and accounting. Without it, any company will struggle and flounder in competitive waters. Whether you have internal accounts teams, rely on outsourcing the role, or use one local to you, investing in accounting is a business winner.
Neil Ormesher is CEO of Accounts and Legal Manchester Accountants, who advise on construction issues and provide key financial insights.
Ormesher says, “We recommend setting a budget for each project, monitoring your expenses and negotiating with suppliers to build good relationships and get better deals. This can drive profitability for construction firms, resulting in stronger profits that help build future investment and win larger contracts.”
Modern construction project management software helps construction firms prioritise clear accounts and budgeting, deliver accurate project estimates to clients and partners, and track expenses in real-time.
Focus on Sustainable and Innovative Practices
With around 365,000 construction companies across Britain, competition is fierce. Sustainability and Innovation help some of these companies stand out from the crowd, winning work on notable and cutting-edge projects that build up their reputation and niche skills.
Understanding evolving sustainability legislation and trends, working with green partners and highlighting sustainable skills is a key method to reduce costs, drive added project value and increase profits. With consumer demand strong for sustainable offices, housing and factories, embracing the benefits of sustainability, eco-friendly design and modern structural/material are all ways to get ahead in construction.
Embracing sustainability also helps protect the environment, a great marketing asset for construction firms. While sustainability might come at an initial higher up-front cost, profits for these projects tend to be greater, while grants and other benefits can help reduce the outlay.
Focus on Cash Flow
With projects up and running, cash flow management is key to measuring the company’s health. Ensuring a robust cash flow helps to maintain operations, meet unexpected costs and meet your financial obligations.
With the construction industry a regular victim of late payments, contractors going bankrupt and delays in supply chains, being able to weather these vagaries is vital.
Companies should focus their efforts on contracts that will pay regularly, and by managing cash flow, and making it visible across the business, you will be aware of which new projects you can bid for with confidence, and which you will need to negotiate hard to take on, or avoid.
Use Technology and Data Analytics
“Digital transformation” is a term familiar in many markets; every firm now relies more on its data and software to guide it through turbulent times and give it a competitive advantage. Cloud and SaaS project management software helps reshape how construction works.
Adopting software, or working with partners who understand it, is key to helping construction firms understand their operational processes and situation, use data-driven decision-making to improve their performance and win new business.
Technology helps firms save money, make smarter productivity decisions, and build through informed financial decisions.
Conclusion
With construction firms accounting for 15% of UK business insolvencies in January 2025, surviving firms can use that stat as a wake-up call for those that aren’t properly managing their finances or accounts.
The UK construction industry depends on sustainable constructors, firms that adopt strategic thinking, and can adapt to a changing landscape. These strategies will help strengthen construction companies and position them for growth. If you’re not at the top of your financial game, there is no better time than now to seek outside support, if you must.
Doing so can help stabilise your company’s financial situation, build profits and start building investment funds to drive growth. Even small companies with ambition can make a lasting legacy in the construction industry, outmanoeuvring larger, slower-moving firms.
