Scotland’s construction sector continues to face a challenging trading environment, with key materials including timber and cement in short supply and prices are rising accordingly.
This is compounded by labour shortages across sector.
It will be of little consolation to the sector that most companies are facing similar challenges as a result of the wider supply chain shock, brought on by surging demand after the COVID pandemic.
Businesses are looking closely at how they can build resilience into the supply chains.
Supply chains that were optimised for efficiency had limited buffers built-in for when something unexpected came along.
What will the next shock be? Are we prepared for a sudden shortage of steel or aluminium? Or the price impact of sustained high energy prices on input costs?
Challenges and opportunities
Demand in areas such as infrastructure and residential property are creating challenges and opportunities.
Clearly for businesses that are still able to fulfil this demand, either through supply chain resilience or otherwise, this represents opportunities for further investment in capacity, as material shortages and price rises are forecast by some industry bodies to be with us for the medium term.
Scarcity and price of materials may also accelerate wider change, for example by accelerating the adoption of new ways of working or materials.
In other sectors we have seen that difficult trading conditions lead to more co-operation and collaboration.
This starts with the basic step of investing more time in building strong supplier and contractor relations and working closely with suppliers throughout difficult trading periods.
Risks and rewards
Rising and volatile prices and material shortages may become the ‘new normal’ in the medium term for Scotland’s construction sector.
For some suppliers this means an increasing order book but for others this is creating real delivery challenges on the ground.
It is as important as ever that all businesses get the basics right in terms of managing working capital and keeping on top of financial performance in these uncertain times.
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