Small and Medium Enterprises (SMEs) in the construction sector are looking forward to a promising 2024, as they expect to hit an average of 13% year-on-year revenue growth, bringing overall construction SME turnover to £237.3 billion.
New research outlined in the Ambition Index from Three Business – the B2B arm of the mobile network Three – has revealed SMEs in the construction sector feel a renewed sense of optimism and ambition, following the tough post-pandemic years.
Contrary to the International Monetary Fund’s (IMF) gloomy outlook, that Britain’s economy will be the slowest growing among G7 nations next year, construction sector SMEs are collectively planning to invest £25 billion in growth in 2024, a 5% increase compared with 2022.
More than three quarters (77%) of SME leaders in the construction sector are planning to invest more in the next 12 months than in the last year. The top areas of investment include marketing (39%), staff training and development (31%), customer service (31%), and recruitment (31%).
Weathering the storm and showing resilience
Nearly three quarters (74%) of construction leaders surveyed say their business is more resilient now than before the pandemic, significantly higher than the national average of 65%. Eight in ten (80%) feel more confident in their business having survived the fallout from the pandemic, and the ongoing cost of living crisis, and 77% feel more able to withstand shocks.
This positive attitude among sector leaders continues into 2024, with more than three quarters (77%) saying they feel optimistic for the year ahead, and nearly two thirds (64%) saying the outlook for next year is better than they expected at the beginning of 2023.
As one of the hardest hit sectors by the pandemic, SME leaders in construction have shown agility in times of crisis, with nearly nine in ten (89%) saying they introduced changes to their business in response to the pandemic and more than three quarters (77%) admitting they had to adapt to survive.
Two thirds (67%) have also come out of the pandemic and subsequent economic uncertainty feeling more capable of dealing with the pressures of running a small business.
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Challenging times remain
While the future is looking brighter than it did last year, there remain a number of challenges for businesses of all sizes, which are often felt more acutely by SMEs.
Over half (51%) of leaders in the construction sector said that the challenges they face as a small business are different to those faced by medium or large businesses, and 84% say the uncertain environment has intensified the risks and pressures of running a small business. These leaders are particularly concerned about high interest rates (30%), cost-of-living implications on customers (28%) – including reduced consumer spending (23%) – and a rise in business rates (26%).
Looking ahead to the Autumn Statement, the optimism of sector leaders about their own business prospects does not extend to the broader political environment, with just 34% saying they are optimistic ahead of the Statement, 36% are apprehensive, and 18% say they are pessimistic.
Of the issues the Chancellor is expected to address, business leaders in the construction sector most want to see an increase in the threshold for Small Business Rate Relief (41%), rate relief to be extended past next April (30%), clarity in government policy (28%), and measures to support the labour market, for example, childcare support and pension changes (25%).
Mike Tomlinson, Managing Director at Three Business commented, “Small and medium businesses are the lifeblood of the UK economy. It’s great to see the strong sense of optimism and learned resilience that’s coming through among all SME leaders, in particular in the construction sector. These leaders have shown that they have risk-proofed their businesses and are now ready to invest in their future, grow and take on the challenges of the next 12 months. At Three Business, we work in partnership with SMEs in all sectors and regions to make sure connectivity is an enabler for growth.”
The UK picture for SMEs
Across the board, UK SMEs are looking forward to an average of 15% year-on-year revenue growth, bringing overall SME turnover from £2tn in 2023 to £2.3tn next year. They are collectively planning to invest £252 billion in growth in 2024, a 27% increase compared with 2022. This means that UK SMEs are planning to invest a sum that is approximately equal to the value of the economy of Finland during 2024.
Investment in recruitment is on the agenda of business leaders across all sectors, with a quarter (24%) saying they are planning to make it a priority. This would make for an estimated collective spend of £20.4bn, equivalent to an extra 630,000 jobs paying the UK average annual salary of £32,000 per year.
Other areas of investment focus for SMEs in 2024 include:
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