News: February 2010

The construction industry was recently given a boost, as the UK’s biggest house builder, Taylor Wimpey, announced a 28% rise in orders for new homes. However, small and medium-sized contractors should remain cautious as the sector takes the first tentative steps towards recovery, warns Bibby Financial Services.

Taylor Wimpey’s recent performance update reveals the company has increased its orders and reduced its debts from £1.5 billion to £750 million since the end of 2008, due to improved market conditions which have stabilised throughout 2009.

However, while these first signs of recovery in the housing market may encourage small and medium-sized contractors to feel more optimistic about future trading conditions, the industry should remain cautious and acknowledge the risk of further weakness in the wider economy.

Jason Heath, construction finance specialist at Bibby Financial Services commented: “Taylor Wimpey’s recent announcement may have come as welcomed news to the construction sector, which is heavily reliant on the recovery of other industries, such as housing, to ensure its full recovery.

“However, caution should be the name of the game within the industry as it looks to the prospect of recovery. It is more important than ever for firms to have an effective credit management system to ensure they are well prepared for any economic ebb and flow that may gradually filter down from the bigger players. With this in mind, alternative cash flow solutions, such as invoice finance, can ensure a regular and smooth flow of cash into the business and make all the difference between boom and bust.”

He concluded: “We would urge all contractors to tighten up their processes - if they have not already done so - to ensure that when recovery does finally arrive, they can reduce the burden of cash flow problems and make the path to recovery more accessible at a time when they need it most.”

www.bibbyfinancialservices.com