Indigo Group CEO Ian Cole-Wilkins (above) has responded to Chancellor Jeremy Hunt’s Spring Budget Statement, saying he must go much further to help construction companies survive…
Indigo Group, which helps construction companies manage their tax and workforce compliance issues, has reacted to Jeremy Hunt’s Spring Budget statement.
While welcoming the tax breaks and incentives which will help all businesses in a time of recession, Ian Cole-Wilkins, CEO of Indigo, has also made it clear that the Chancellor has not gone far enough to specifically help the tens of thousands of construction companies struggling financially. According to the recent Begbies Traynor “Red Flag Alert” report, the construction sector has the highest percentage of companies in financial distress.
“Our concerns, which the Chancellor should have done more to address, include the impact of Domestic Reverse Charge VAT, persistent late payment cycles, the lack of credit insurance, escalating cost pressures, project planning delays and general policy stagnation,” says Ian.
“The construction sector, a vital engine of the UK economy, faces unprecedented challenges. A recent report by the Construction Industry Training Board (CITB) highlights the sector’s financial distress, with a significant number of companies struggling to maintain liquidity and operational efficiency due to the 20% cash flow reduction caused by the Domestic Reverse Charge VAT. This policy, aimed at combating VAT fraud, inadvertently places a hefty burden on construction businesses, squeezing their cash flows and hampering their ability to invest and grow. We would have liked to have seen serious reform in this area.”
Relatively high interest rates and higher levels of inflation than we have seen for many years have further exacerbated the financial strain on construction companies, increasing the cost of borrowing. This issue is compounded by the industry’s notorious late and slow payment cycles, which disrupt cash flow and operational planning. The Federation of Master Builders’ latest report reveals that delayed payments are causing significant financial instability, with many firms facing the risk of closure.
“Although previous budget statements have attempted to tackle late payment, we know from our customers that payment terms have in fact got longer, not shorter,” says Ian. “This has a major impact on the survival rates of contracting companies and we will see more casualties if it continues. The lack of credit insurance emerges as another critical concern, compounding the late payment crisis, leaving businesses exposed to the risk of non-payment and hindering their ability to secure new projects. This issue is particularly pressing in the current economic climate, where confidence is key to maintaining business continuity and fostering growth.”
Although the Chancellor has announced planning reform in previous budget statements, Indigo would like to see even more reform that hastens the process and releases land on which to build the homes the UK population badly needs.
“Policy stagnation and a sense of isolation from pivotal government decision-making processes have left many in the construction industry feeling overlooked,” continues Ian. “The sector requires dynamic and responsive policies that reflect its evolving needs and challenges, particularly in the face of global uncertainties and economic shifts. The Chancellor could be doing a lot more to help those construction companies which contribute so much to our economy as a whole.”
Indigo Group has resources and guides on its website for contractors and subcontractors covering worker engagement, outsourced payroll, recruitment and compliance. For more information click here.