The British pound sunk to a record low against the US Dollar, caused by the mini-budget announcement made by The chancellor Kwasi Kwarteng. Doubts surrounding the government’s planned spending and the amount they are looking to borrow to aid the planned tax cuts dragged the value down. The weaker pound will affect Brits in several ways with the costs of goods and services that are imported into the UK now becoming more expensive. Fix Radio – the UK’s only national radio station for builders and tradespeople – expects it to cause a testing time in the UK construction sector – an industry already battling several obstacles – which now faces an increase in prices for much-needed materials.
The fall in the value of the pound could further heighten the current issues that the industry is facing with inflationary pressures, supply chain disruptions, labour and materials shortages which have all contributed to construction growth coming to a halt. All of these factors, are set to continue the slowing rate of growth in the construction sector, eventually causing growth in the industry to grind to a halt – Fix Radio predicts. The implications of the construction sector winding down could heavily weigh on the new starters to the industry who are struggling to keep afloat, with Fix Radio finding that close to 40% of young sole traders saying their business is on the verge of breaking point.
These businesses, which are typically family-run and employ fewer than 50 workers — are already being hampered by sharply rising costs which are set to spiral due to the fall of the pound, from shipping to energy and materials to labour. Bankruptcies in construction are outstripping those in every other sector in the UK – according to the latest ONS statistics. In April alone, almost 400 SME’s went bust, representing a near-50% increase compared with January 2020, before the pandemic. The next step, which is likely to be taken by the Bank of England, could be to announce an emergency increase in interest rates before its next scheduled policy decision on 3 November. Whilst it brings opportunities to increase the value of the pound, the construction industry will have to continue to battle major problems for the foreseeable future.
In addition to this, Clive Holland, broadcaster on Fix Radio, reveals how the current economic situation has put pressure on the construction industry:
“The economic crisis is affecting the industry as we speak and it’s actually getting worse now, creating what I class as a ‘perfect storm’. We had Brexit and we had the problems that Brexit brought, particularly with the huge amount of foreign workers going back home. This leaves us with a shortage of approximately a quarter of a million people for the next five years. So, it’s important that we encourage youngsters leaving college to come into the industry to ease the pressure on the existing workers.
“We’ve also got so much work coming at the minute and 27% of these small and medium-sized businesses are currently on the cusp of collapse as a result, according to the latest research we commissioned at Fix Radio. Then of course, nobody foresaw the COVID situation or what that would bring in terms of the shortage of materials and the soaring costs. The price of timber for example, has gone up by 100% in only two years.”
