Why are some façade contractors thriving while others are collapsing?

In recent months there have been several notable instances of specialist facades contractors collapsing seemingly out of nowhere. This has left many out of work on short notice. This is in stark contrast to many other contractors, both sub and main, in the sector who are thriving by securing more work at a steady pace, bringing on new talent at all levels, and growing as a company.

Why is this happening?

It is difficult to pinpoint one specific reason for such a disparity in the industry, instead looking at the bigger picture may be what it takes to fully understand the situation.

A big issue currently is the high number of project delays and cancellations. This by itself is a very complex topic due to a range of issues, ranging from resource shortages, macro-economic issues, rise in inflation, labour struggles, and issues with supply lines. To summarise the point a number of consistent delays and cancellations can have a heavy impact on not only the financial state of a company but also on the morale of the employees and its standing within the industry. This can lead to less work in the future and lower employee retention.

Another issue that has to be raised is Covid-19. A large majority of businesses in the UK during the period of lockdown suffered financially as operations had to be halted, later only coming back in a limited capacity. Profits dropped while salaries rose, projects were severely delayed, and the working culture changed dramatically. While many have recovered, or are recovering, this may have put considerable strain on several contractors that they could not reasonably recover from.

Having the right commercial talent within the company is another crucial factor in the decline of these contractors. Having a team of talented and capable quantity surveyors, estimators, and commercial managers is key to staying on budget. This has been an issue for many in recent times as there is a huge demand for commercial roles with lower supply, especially in recent times. Going over budget, even by a small amount, regularly due to a lack of commercial talent is hugely detrimental to the long-term financial health of any contractor.

To add to the previous point, cash flow management is a huge area to keep on top of that could make a huge difference, as obvious as it may sound. Securing projects is great but if there is a dispute regarding the project or unforeseen expenditure then a large sum of money can effectively be lost, either short-term or permanently, leading to struggles in the future. If cash flow is not managed accordingly and investments are made that won’t come back till a much later date or are trickle-fed inefficiently, then you simply won’t have enough money to operate.

Then why are other contractors thriving in these conditions?

An important area that needs to be considered is how many sub-contractors have pivoted to being main contractors within the industry to increase their profit margins when securing work. This does apply a certain level of higher expectations and pressure and may be a risk others are unable or unwilling to take.

Bringing on and retaining the right talent is vital to the success of a company. Many of the most successful contractors within facades can retain valuable employees, especially within their commercial and design teams, allowing for a more efficient and sustainable level of output that companies with high employee turnover may not be able to accommodate. On top of this bringing on graduate and trainee level employees can be good for the long-term health of a company for many reasons. In this regard using a service like Jobsocks could help in finding just the right mix of experience and skill could make this area much more manageable than otherwise possible.

Luck should also be mentioned. While not a quantifiable factor, or one that can be influenced, it does play a role in the successes of one company and the struggles of another. Many contractors may experience delays or issues that cannot be controlled or anticipated, and others may have things go reasonably smoothly. A period of poor luck can put any company in a bad place. This should be caveated by saying that a variety of factors can and should be accounted for, but some events can be seen as simply out of reasonable control.

Diversified cash flow is also important in these situations. It can be seen as a luxury to many to be able to afford the initial cost of securing a few projects since not everyone is at the right size to spread out over a large number of projects. However, making sure all your eggs are not in one basket is very important. This may mean not having too many projects in a similar area, meaning they won’t encounter the same problems, as well as potentially having different types of projects. This would mean that one delay would not derail the whole operation.

Conclusion

As mentioned, it’s difficult to pinpoint one reason why a company may collapse or struggle while another can grow within the same industry. The above are good reasons but not the only ones. This topic has a huge amount of nuance and flexibility as it is always on a case-by-case basis.

The good news is that while a number of contractors have recently ceased trading there are plenty still in the industry looking to bring on new talent and secure consistent work with new contractors springing up and larger companies opening facades divisions. 

If you find yourself being made redundant you can register and put your CV on the Jobsocks platform to easily pair with contractors in your sector.