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Construction industry most invested-in sector in 2018; demolition trade booming; imminent interest rate changes ensure fixed-rate finance is crucial for 2019 and beyond

DEMOLITION And Construction companies are set to enjoy further periods of buoyancy into 2019 that have been stimulated by continued investment and government policy changes.

Investment in construction equipment alone has increased by 32 per cent during the last financial year, while the removal of council borrowing caps introduced by the government ensures that house-building is set to flourish further into 2019.

Interest rates rose by 0.25 per cent earlier in 2018, but with inflation still high and consumer spending due to increase throughout the last quarter and beyond, rates are due to increase further before the end of the year and throughout 2019.

A rise in interest rates will ensure the cost of investing in your company will increase, so the immediate investment in finance that carries a fixed rate will be imperative to avoid more costly investments, which will be unavoidable during 2019.

Rates have been enduring record lows, so there is no greater opportunity to make finance arrangements cheaper than it is now.

What is the financial solution for your business?

Portman Asset Finance offers fixed interest rates on its loan agreements – whether asset finance, business loans, or refinance.

The demolition trade has joined construction in enjoying a superlative period – spanning multiple years.

Peaks and troughs can sometimes make the decision to invest harder, but with both sectors enjoying consistent growth during the last six years, not investing in the new assets that are improving rivals will stymie 2019 success.

Turnover for the UK’s leading demolition firms has increased by more than 20 per cent each year for the last three financial years, while profits have grown concurrently with the investment.

Compared to 2016, profits have increased by 74 per cent, with overall margins increasing, too, during this period: 5.6 per cent increases in 2016 and 7.9 per cent in 2017.

The correlation to extrapolate for those within the construction and demolition sectors is thus: the more you invest and diversify, the higher the turnover and profit margin you will enjoy.

Demolition asset finance used to purchase drone to improve profits and service delivery

Construction and demolition asset finance needs to be enacted now before interest rates rise.

Of those companies who have seen profits increasing in tandem with turnover, it was those who expanded into new sectors that saw the most success – with one company, Keltbray, enjoying 125 per cent increases in profit this year compared to 2015.

Inflation has been consistently high, and with uncertainty regarding the cost of imports post-Brexit, inflation may rise further still, which will be the catalyst for further interest rate increases throughout the year.

Even with continuity compared to 2018’s trade tariffs and overall business costs, Chancellor Phillip Hammond has confirmed that business rates will fall, as you plan your finances for 2019.

Improvements across these sectors has stimulated production and investment in the plant and hire industry, which has seen growth of 10 per cent, alongside a 15 per cent increase in equipment finance investment.

This will be the last opportunity to secure low interest rates for your business

Securing these products quickly will be imperative, but there is no need to sacrifice working capital.

Fixed-rate agreements from 2.5 per cent and the removal of tax liabilities ensure you can actually save on the ultimate cost of the assets invested in.

No upfront costs means that cash flow is protected during these periods of investment, with the returns stimulated by the aforementioned changes to business rates and housebuilding regulation.

Poor currency performance in countries like Turkey has lowered the cost of importing construction and demolition plant and machinery, with the cost, once purchased, eligible for a capital allowance from the government – this forms a part of your Annual Investment Allowance.

Geraldine Kilkelly, head of research and chief economist at the FLA, reacted to the buoyancy and scope for construction and demolition companies to invest immediately. She said: β€œThe asset finance market reported broad-based new business growth in August.
β€œThe plant and machinery finance sector grew at its strongest rate so far this year, with new finance for construction, manufacturing and agricultural equipment up by 32%, 31% and 10% respectively, compared with August 2017.”

Head of Marketing at Portman Asset Finance reiterated the need for those within the industries to invest quickly to ensure of success. He said: “Interest rates are set to rise during the next quarter, so securing fixed-rate plant and machinery asset finance now is vital.

“Taking out an arrangement immediately will save the average business thousands of pounds over the course of a multi-year term, while the increases in investment and innovation across the sectors will render those not evolving, weakened.”

Secure construction asset finance for your business now through our experienced account managers on 01604 761 276. They work with more than 40 lenders to secure bespoke arrangements to suit your immediate and future financial requirements.

 

 

Portman Asset Finance