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A shifting economic landscape is putting pressure on businesses across sectors. Specifically, many of the issues we’re noticing are affecting businesses in the construction industry. Rising costs, constrained lending, and persistent project delays are some of the conditions shaping our clients’ day-to-day operations. Here’s what you should be aware of.
Interest Rate Pressure
Recent decisions by the Reserve Bank to increase interest rates by 0.25% in February, March, and again in May are having a direct impact on businesses with any form of borrowing. The latest increase has lifted the cash rate to 4.35%, with lenders already passing higher borrowing costs on to businesses and consumers.
Clients relying on working capital facilities, overdrafts or existing debt structures are feeling the pressure. For many, this is reducing cash flow flexibility at a time when resilience is already being tested.
Rising Costs Across the Supply Chain
At the same time, the broader cost of doing business continues to climb. Ongoing global conflict and volatility in energy markets have seen diesel prices surge, effectively doubling in some cases, which is flowing through the entire supply chain. This is particularly evident in the construction sector, where transport, materials, and operational costs are all heavily impacted.
Related Reading: Tips for Construction Companies on Building Profit
Delays in Construction and Development
Another challenge facing the construction industry is project delays, with timelines being pushed out due to a combination of regulatory hurdles, compliance requirements, and persistent red tape. Developers and construction professionals report that government activity and responsiveness have yet to return to pre-COVID levels, further slowing project commencement and completion. In particular, industry data shows that 88% of builders are experiencing approval delays of more than eight weeks, and one in three are waiting over six months. As a result, despite strong underlying demand, project delivery is slowing.
Related Reading: How We Make a Difference In The Construction Industry
A Shift Toward Profitability, Not Just Activity
In this environment, performance measurement is becoming more precise. It’s no longer enough for businesses to simply be “busy.” The key question now is whether that activity is translating into sustainable profitability. Margins are under pressure, and inefficient operations are being exposed more quickly.
The Importance of Advisory Support
Ultimately, the businesses that will navigate this period successfully are those that adapt. Whether that means repricing services, improving operational efficiency, or restructuring debt, responsiveness is critical.
Given these conditions, proactive engagement with advisors has never been more important. Businesses that regularly review their strategic direction are far better positioned to respond effectively to change.
For those experiencing uncertainty, early action is key. Addressing challenges early can make a significant difference in outcomes.
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