Funding construction projects - are lenders still cautious?

The current economic landscape has shifted beyond recognition in the last year. The results of both Brexit and the election of Donald Trump in the US have placed a different perspective on many industries.

Prior to these two world changing events the outlook for the construction industry here in the UK was that of slow growth which had stalled in the middle of last year due to the uncertainty of the Brexit vote. To explore the impact of this further please read our report"Brexit: What The World Is Saying"

The professional services company, PWC, in its’ report on UK economic prospects after Brexit (www.pwc.co.uk/assets/pdf/ukeo/ukeo-july-2016-economic-prospects-brexit.pdf) predicted that the construction industry would be one of the hardest hit sectors. Early reports from the likes of property consultant Knight Frank, in their Residential Development Finance Report 2016/17, (www.irishtimes.com/business/construction/uk-housebuilders-find-lenders-more-cautious-after-brexit-vote-1.2873538) seem to indicate that, despite a growth in demand for new properties, lenders are reticent to invest, particularly in Central London where the forecast is for the price of properties to fall.

Whilst the outlook for the UK market appears to be challenging, there may be opportunities abroad for UK construction businesses due to the falling pound, however the definition currently being provided by the triggering of Article 50 and the new trade deals that are under negotiation may provide a new impetus to the market.

Some construction companies have sought support from peer to peer lenders, intermediary or marketplace websites that match individuals or companies who need finance with savers or investors looking for a good return on their money, thus bypassing traditional financial institutions such as banks, so borrowers can sometimes get slightly better rates, or find credit when they have been refused elsewhere. This is an interesting and innovative way to secure funding and we can see a rise in its uptake. It is important to gain investment and keep growing during difficult times in order to thrive and stay ahead of your competitors. Retaining your top talent is also a factor and it is important to keep investing in your staff who are the future of your company.

In a changing market opportunities will always present themselves.  Do you have any experiences of funding in the construction sector you would like to share?

For more information please contact Andy Hurley on  01628 857318 or Andy.hurley@bps-world.com