The Courier & Advertiser (Fife Edition)
Scottish construction firms warned to keep focusing on cash flow
HENDERSON LOGGIE: Dundee-based accountants’ report shows construction companies in Scotland have not grown as fast as sector firms in the rest of Britain
Scottish construction firms have grown turnover at a slower rate and seen profits shrink compared to firms south of the border, according to a new report.
Dundee-based accountants Henderson Loggie analysed the accounts of 1,708 construction firms in Britain, including 157 in Scotland.
Their report shows British firms in the sector increased their turnover by 14.8% over the last three years, whereas Scottish firms had seen their sales rise by 8.4% over the same period.
Meanwhile Scottish companies with turnover of less than £100 million experienced, on average, a 19.2% decrease in pre-tax profits over the period.
Those with a turnover of between £5m and £10m were hit hardest, with their accounts showing a 66.6% reduction in pre-tax profits, compared to a 5.3% increase Britain-wide.
Blair Davidson, head of property and construction at Henderson Loggie, said: “It’s encouraging to see some positive headline results for the construction sector but the industry continues to face a number of challenges, in particular skills shortages which remain a key barrier to growth.
“Sector employee numbers in Scotland have fallen by 5.7% on average, compared to 1.6% across Britain.
“The largest companies nationally, those with a turnover of over £200m have reduced their workforce by 17.5%.”
The report shows gross margin for Scottish firms increased from 16.54% to 17.25% over the period, where nationally the figure has grown from 18% to 20% on average.
Shona Campbell, director of business recovery and insolvency at Henderson Loggie, said Scottish construction firms should concentrate on their cash flow in a “difficult” market.
She warned: “City Region Deals and large scale road and infrastructure projects have underpinned sector performance in Scotland over the past five years, yet this report presents a mixed tale.
“It’s a difficult market and businesses that chase revenue yet ignore their cash flow position could easily become one of next year’s insolvency statistics.
“Proactive management and early intervention is key to recovery when times get tough.
“Bolstering management reporting in order to know the true cash position of the company is as important for smaller companies as it is for construction giants.”