Building under pressure
The building industry is facing significant challenges, particularly self builders, smaller scale property developers and contractors, as they grapple with escalating costs and increasingly narrow profit margins. This comes at a time when great properties and high quality are in high demand.
Budgeting and costs control have never been more important.
The construction sector has experienced substantial increases in material prices, with some essential building materials seeing price hikes of over 10%. For instance, timber prices have surged by more than 80% in recent months, while steel and copper have risen by 40%. These increases have been exacerbated by supply chain disruptions and geopolitical factors, such as Brexit and the war in Ukraine, leading to a volatile market for materials.
The industry is also contending with a shortage of skilled workers. The number of self-employed construction workers has declined by 15.9% since 2017, creating a significant skills gap. This shortage not only affects project timelines but also contributes to increased labour costs, further squeezing profit margins.
65% of Federation of Master Builder members report increasing service prices due to rising material costs. Already thin margins are being squeezed. The average profit margin in the UK construction industry has decreased, with many companies now operating on margins as low as 10% to 15%. This slim margin leaves little room for error, making it increasingly difficult for smaller firms to remain financially viable.
Implementing robust cost management practices is a must. Detailed budgeting and effective control of project and costs changes, enables businesses to adhere to budgets, have long sight to potential issues that need workarounds, and enhance overall project success. This is vital for profitability and also strengthens a company's reputation for delivering projects on time and within budget, enabling them to win further work and secure future investment.
Having effective costs data provides the ability to improve operational performance and price future work more accurately, minimising risk of project losses. By systematically identifying and eliminating unnecessary expenses and accessing live data on pricing in a volatile market, businesses can allocate resources more effectively, secure the best pricing, and ensure funds are available for the most value-generating activities.
Costs discipline also fosters a culture of efficiency and accountability, enables better informed decision-making and makes it easier to adapt to changes, all of which contribute to sustained growth in a competitive landscape.
There are a range of ways to manage costs on property development projects. Excel is one of the most effective tools, but it has significant limitations in a modern context. As a stand alone tool, you have a lot of manual work to do in and around Excel. Copying and pasting, cross checking, sending files to yourself and others, looking at bank statements and receipts, and spending a lot of time trying to keep things up to date. Inefficiency and error are commonplace and it is hard to get a view across programmes.
ClearBuild addresses this mess with modern technology and an easy to use digital interface. Generating budgets, using real-time pricing information, setting alerts for fluctuations, ‘locking’ in costs, and keeping tight control of changes through approval flows, ClearBuild takes the strain out of costs management.
You can make sure all team members are notified and can collaborate around changes when or before they happen, reducing the risk of costly delays and miscommunications. Dashboards and alerts make it easy to monitor progress and make timely decisions to keep projects within budgets. Approved changes auto update through your costs schedules and contract documents, saving you hours in front of a screen. Making sure everyone can see the information they need when they need it avoids arguments down the line.
With the economic environment and competitive landscape putting ever more pressure on property developers, self builders and contractors, costs control and efficiency have never been more important. Nor has the opportunity been so great to harness technology to help take the strain.