Construction industry swings back to profit

New data from the CN100 2022 ranking of the UK’s 100 biggest construction firms has discovered that aggregate pre-tax profits for the 100 biggest construction firms increased by just over £1.17bn. Equivalent figures from 2021 showed an aggregate pre-tax loss of £40m. There is a large contrast between these figures over the two years. Interestingly revenue increased by only 3.9% in 2022 compared to 2021. So, why has profit increased so significantly when revenue has increased by only 3.9%?

Why have the construction industry’s profits increased so significantly?

The impact of the pandemic had a significant impact on the performance of the sector. However, in recent times the pandemic has eased allowing the industry to reopen again. Since reopening construction site, firms have been focusing on how they are going to increase their profit margins following the turbulence of the pandemic. This explains why total revenue has only increased by a small amount as completing more work has not been the focus of the industry. These figures show that the construction industry is rejuvenating and projects that have been delayed due to the pandemic have been resumed as confidence returns to the sector.

The economy still cause for concern

Although the sector has performed well over the past year, it is important to remember that the construction sector is not out of the woods yet. Firstly, this data is only from the top 100 biggest construction firms in the industry. For construction firms outside the top 100, figures may be different. Furthermore, there are concerns about what impact inflation and material shortages are going to have on the sector. Experts predict that the impact will have a significant effect on next year’s profits in the industry. Furthermore, with the potential for a recession this winter, a decrease in economic activity may also have an impact on the performance of the construction sector.

How can we help?

Hawsons has a dedicated team of specialist property and construction accountants. Having an accountant who understands the challenges of this dynamic sector and is able to help you plan for the future is an advantage in a competitive environment. At Hawsons we have a great deal of experience in advising and helping businesses in property and construction and we can assist you as your business grows.

Our in-house tax team has advised in many aspects of taxation specific to the property investor including in the areas of VAT, Capital Allowances, Income Tax, and Corporation Tax and Capital Taxes.

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