The construction sector has faced numerous challenges in recent times. The current landscape the industry operates in is being shaped by economic pressures, rapid advancements in technology, and legislative change. It means that, more than ever, businesses need to be on top of their finances – whether that’s working to reduce tax liabilities; making the most of reliefs, grants, or funding; or forecasting what legislative changes mean for your business’s books.
Our expert team working with the construction sector have provided key insight into issues affecting the industry, and what actions you can take to ensure the financial health – and hopefully wider prosperity – for your business.
The perfect storm
It’s been a turbulent five years for the construction industry. Political events like Brexit have triggered labour shortages, bred uncertainty, and enacted a variety of bureaucratic changes to regulations and standards. Inflation and international trade tariffs have increased the cost of materials, caused supply chain disruption, and raised the wider cost of doing business.
But whilst all of the above continue to affect businesses, the Chancellor has very clearly outlined her plan: to trigger growth through investment in infrastructure and real estate – specifically the building of new homes. The Government therefore needs a buoyant, thriving construction sector to support its aims for economic growth. Here are a few of the issues businesses currently face, and what’s available to help them mitigate the cost.
Advancing technology
What’s changing?
You read it in the news, on LinkedIn, and hear it from your peers and colleagues – advancements in technology, like AI, are transforming how we do things. No industry remains unaffected. AI, robotics, and IoT are now being adopted into construction processes and operations by forward-thinking firms, creating efficiencies and saving time and money for teams.
As an example, the application of AI in construction is far-reaching. It can be used to automate manual administrative tasks like record-keeping and accounts; help to revolutionise health and safety through modelling and risk prediction; support architects and engineers with design work and 3D modelling; and help overarching project management with cost estimates, budget tracking, and work scheduling.
For many construction businesses introducing these technologies is a costly project – but it will eventually become a necessity to keep up with competitors. As it stands, there are a range of tax incentives that can help to offset the cost.
What you can do…
If introducing technologies like those listed above, you might be able to access tax incentives like R&D tax relief, or capital allowances for investments in technology and innovation.
It is true that HMRC is cracking down on R&D claims as it works to stop fraudulent activity and error across the board. In 2024, the two existing systems (one for large businesses and one for small businesses) were brought together, to become the Research and Development Expenditure Credit. The criteria companies need to meet are more stringent than before, but it still signifies significant savings for legitimate claims.
If you’re a business subject to UK corporation tax, capital expenditure on qualifying assets (like new technology and systems) could be fully deductible from your taxable income.
Supply chain and cost pressures
What’s changing?
The economy is challenging right now. The ongoing impact of inflation and Brexit was difficult enough, and now geopolitical risks and tariffs are further increasing the cost of materials, equipment, and supply chains.
Supply chain disruption – whether caused by unavailability of materials, contractual disputes over cost, or sub-par quality of supplies – is becoming increasingly common, having a negative (and often costly) impact on delivery and completion.
As well as materials and equipment – labour is becoming increasingly expensive too. The Government’s recent increases to Employers’ National Insurance and the National Minimum Wage once again make employment more expensive. Whilst skills shortages are still abundant, in part due to Brexit, but also due to the skills gap that now exists in the UK.
We’re pushing towards a greener future by delivering more extensive renewable and low-carbon technologies like heat networks, solar, or heat pumps, but the construction skills required to deliver these aren’t yet prevalent enough across professionals at the number required. Upskilling needs to happen – but who will pay for it at a time when purse strings are tight?
What you can do…
There’s no magic wand or tax incentive to mitigate the cost of the above. However, support is available. For example, apprenticeship grants can help offset some staffing and training costs, providing a practical way to invest in your team while managing your bottom line. These costs can also be managed through a robust financial strategy and by being proactive with tax planning. Looking forward and assessing what further changes might be coming that could affect business—and working with an experienced financial partner—are more critical than ever. With the right expertise, you can develop strategies to keep you competitive, financially resilient, and in good financial health.
Sustainability and ESG
What’s changing?
As the UK pushes towards its ambitious net zero targets, more and more legislative change is being introduced to incentivise and enforce greener practices across all industries – including construction. Carbon reporting requirements are ever-increasing – as is each business’s responsibility to ‘clean up’ its operations across all areas of work.
A Practical Guide pulled together by the UK Green Building Council summarises ‘Sustainable Construction’ around the following principles:
- Energy and carbon reduction: Using renewable technologies on-site, like electric vehicles instead of diesel.
- Low embodied carbon: Optimising the energy efficiency of any resulting buildings through selecting the right, ‘low carbon’ materials and ensuring it’s appropriately insulated, uses efficient glazing etc.
- Sustainable materials: Look at the sustainability of these materials too. Can you use recycled or repurposed materials? Can you source locally to minimise the carbon required to get said materials to your site?
- Waste reduction: The amount of waste materials – especially for those who demolish before rebuilding – can be excessive in the construction industry. Trying to lower the amount and reusing where possible will help you to be more sustainable.
- Enhancing nature: Improving local biodiversity, minimising noise, pollution, and disruption to the local environment should all be considered when planning construction projects.
- Prioritising health, wellbeing and social value: The safety, wellbeing, and happiness of your teams should also be considered. This ties into fair work, equality and diversity, and local employment.
What you can do…
To make this task less onerous (and expensive) for businesses, the Government has a range of incentives available to support sustainable construction – with more expected on the horizon.
Tax reliefs are currently available to companies who prioritise energy-efficient systems, low-emission machinery and green building materials. If you’re using any of the above, it’s worth checking if you’re eligible for any of these reliefs. Funding opportunities are also available (to certain businesses who qualify) for activities that relate to reaching environmental targets.
Foxley Kingham can help…
Foxley Kingham is home to an expert team of finance professionals, with vast experience in the Construction sector. We can help you with all the actions listed above, to help ensure your business is in the best place to thrive in today’s challenging environment.
We can specifically assist you with:
- Strategic tax planning to reduce liabilities and free up capital for reinvestment
- Financial forecasting and cash flow management to maintain project stability and long-term viability
- Managing your CIS submission
- Helping access grants, funding, and tax reliefs for innovation and sustainable practices
- Insights into corporation tax changes and how they impact the construction sector
- Understanding recent National Insurance adjustments and their effect on payroll costs for site-based and project teams
If you’d like to chat to our team about how we can assist, fill out our contact form or feel free to call us for an initial, confidential conversation.