Construction's harder than it's ever been
Christopher Ray • 8 February 2021
Tolerance of CV19-related contract issues fading
After the beginning of the original lockdown 1.0, the construction sector was actively encouraged to continue by Government. Many sites closed, some remained open. The reopening varied greatly. Once open, they were subject to the new phenomena of “social distancing”… a technique expertly practised for years by hapherphobics. Fortunately Government realised that construction was a vital part of the UK economy, and whilst operating under the same restrictions as the rest of us, sites could remain open and operate safely.
Or so they thought…
During 2020, it’s fair to say that we were all dealing with a common enemy. Outside of Donald Trump’s inner sanctum, it was considered nobody’s fault that we were exposed to fast-spreading pandemic. There was a lot of sympathy for your fellow man’s situation.
This common enemy might have affected your health, created concerns for your family and friends, impacted your professional or financial world, or affected your mental health.
In most cases we saw the coming together of strangers, supporting and encouraging one another in the face of that common enemy.
And it extended to businesses and firms too. We saw unheard of levels of sympathy and cooperation between competitors.
In the construction industry, a sector famous for its paranoia through the contract chain, unprecedented sympathy and understanding for customers and suppliers affected by CV19 was seen.
But all good things come to an end... including the 2020 bonhomie in construction.
Contract disputes seem to be on the rise as financial arguments begin to harden. And tolerances to CV19-related problems have all but gone. Throw the end of the Government support schemes, Brexit, IR35, and the cash impact of the new VAT rules into the mix, and it’s a really difficult place to be right now.
Branta has now seen numerous cases where disputes are hardening as a result of not being able to provide the requisite amount of labour and materials. These absences are attributable to a mix of contracting CV19, self-isolating as a result of exposure to CV19, the fear of catching CV19, or management teams taking the decision to not risk infection by keeping gangs off-site.
Whilst a lot of these concerns are of course real and valid, this is the construction industry. The protagonists are prepared to get the contracts out (always a bad sign that often doesn't end well) and, in our experience, the party with the best record-keeping often wins and understands the mechanics of the contract wins.
CV19, whilst causing pain and suffering on so many levels to so many people, is having an unprecedented effect on UK construction. So whilst the headlines show an industry that’s open for business, behind the scenes it’s a very tough sector to be in right now.
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What's going on? If you’ve been watching the news or even just your cost of importing parts or raw materials, you’ll know that things are getting… spicy. The Dollar has taken a knock, the Pound is holding strong (for now), and the Euro is nervously watching from the sidelines. This is no ordinary market flutter — it’s the prelude to what’s being dubbed “Liberation Day,” thanks to the Trump administration’s announcement of sweeping new tariffs. So, what does it mean for you, the UK business owner? Let’s break it down. The Tariff Trouble: What’s Triggered It? Over the weekend, Donald Trump confirmed the US will impose reciprocal tariffs on all countries, effective 2nd April. That includes the UK, EU, Canada — the lot. Markets reacted quickly and nervously. The US Dollar index slipped for the third day running, while Sterling held relatively firm and even gained ground on the Dollar and Euro. Tariffs are set to hit EU car exports first, with a flat 25% on any vehicle not made in the USA. The EU has already promised retaliation. So, we’ve got: A potential full-blown trade war brewing. Worries about global inflation returning. Investors pulling back from risk. UK and EU exporters in the crosshairs. How Currency Is Moving – And Why It Matters USD : Investors are ditching the Dollar. Why? Because tariffs risk economic growth and may force the Fed to hold off further rate hikes. The greenback has lost ground against both the Yen and Sterling. GBP : The Pound is surprisingly stable. Prime Minister Starmer’s “productive talks” with Trump didn’t prevent the tariff threat, but Sterling has remained above 1.29 against the Dollar and 1.19 against the Euro. EUR : The Euro has crept up slightly — mostly because the Dollar is wobbling. But with Germany heavily reliant on car exports to the US, this trade standoff could hit the Eurozone economy hard. To add fuel to the fire, the ECB just cut interest rates by 25bps, and may need to go further. What Does This Mean for UK SME Owners? If you’re importing goods priced in USD or exporting to Europe, the FX markets are going to start affecting your margins — if they haven’t already. Let’s take a couple of examples: Importer of electronics or components from China or the US : The weakening Dollar might look helpful — goods priced in USD cost less in GBP. But beware: tariffs could push base prices up. Exporter of UK-made machinery to Germany : The Euro’s wobble could make your goods relatively more expensive in Europe, even before EU retaliation hits confidence and demand. Don’t Panic — But Do Prepare This isn’t a time to bury your head in the sand. You don’t need to be a currency trader to manage FX risk — but you do need to be aware. Here are a few practical steps to consider: Review your foreign currency exposure : Which contracts, invoices or suppliers are USD or EUR-denominated? Talk to your bank or FX provider : Ask them about forward contracts or hedging tools. Scenario test your pricing : How sensitive are your margins if GBPUSD hits 1.25 or EURGBP shifts to 1.10? Watch out for knock-on effects : Global inflation, slower growth, tighter credit — it all filters down to SME trading conditions. The Bigger Picture We’re heading into a volatile Q2. The FTSE 100 dropped nearly 1% on Monday, and financial stocks are feeling the squeeze. Risk appetite is down. This isn’t just a blip — it’s policy-driven turbulence, and it could persist well into summer. UK SMEs — especially those in manufacturing, import/export, or with international supply chains — should keep close tabs on currency movements and trade policy headlines. Self-Test: What Should You Be Asking Yourself? How much of my revenue or cost base is exposed to USD or EUR currency movements? Have I reviewed my pricing strategy in light of recent FX volatility? Am I using any FX tools to hedge risk, or am I leaving it to chance? What would a 5–10% swing in either direction do to my cash flow or profitability? Final Thoughts It’s tempting to assume that trade wars and currency swings are for the “big boys” to worry about. But for many SMEs, this sort of disruption can mean the difference between hitting your profit targets or missing them entirely. At Branta, we help businesses like yours navigate financial uncertainty, structure for resilience, and plan for sustainable growth — even in volatile conditions. If you’d like a no-obligation chat about your FX exposure, debt refinancing options or M&A strategy, give us a ring . We speak fluent SME.
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Introducing Our New Series: “Global Markets & FX” As part of our ongoing commitment to helping UK SME owners navigate the financial landscape with clarity and confidence, we’re launching a new type of blog post. Each week, we’ll deliver a concise, jargon-free summary of global economic events that may influence foreign exchange (FX) markets — and, by extension, your business. Whether you’re importing machinery from Germany, exporting craft gin to the US, or simply trying to manage your overseas supplier contracts, FX fluctuations matter. And understanding what’s driving those movements can give you a real edge. This Week in Brief The US Dollar remains strong amid confusion over President Trump’s looming reciprocal tariffs. The Pound is holding firm , but the UK Spring Statement on 26 March could shift sentiment quickly. The Euro retreats , as EU braces for the economic impact of a US-EU tariff clash. Let’s break it down and look at what’s driving the numbers — and what it could mean for your business. 🇺🇸 US: Trump’s Tariff Tensions Rattle the Fed The US Dollar Index remains above 104, showing sustained strength. But behind that steady number is a volatile political situation. President Trump’s proposed reciprocal tariffs — set for an announcement by 2 April — have markets guessing. Will it be a broad-based tariff hike? Or something more targeted? He hinted at “flexibility”, but few are reassured. The Federal Reserve, understandably, seems as baffled as the rest of us. Fed Chair Jerome Powell admitted: “It’s just… really hard to know how this is going to work out.” The Fed’s main concern? That trade tensions will fuel inflation while weakening growth — a nasty combination that’s difficult to manage with interest rate policy. They’ve cautioned that sudden shifts in market sentiment could spook global capital flows. 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With tariff uncertainty, differing interest rate paths, and political unpredictability, it’s more important than ever to build resilience. Here are a few simple ideas: Review your FX exposure – both incoming and outgoing payments. Talk to your accountant or adviser about whether forward contracts could protect your margins. Keep an eye on data drops (like CPI, GDP, and PMIs) to anticipate volatility. Self-Test: Is Your Business FX-Ready? Ask yourself the following: How much of my revenue or cost base is exposed to foreign currencies? If the GBP were to move 5% against the USD or EUR, how would that affect my margins? Do I have any contracts that lock me into specific exchange rates or payment schedules? Am I regularly reviewing FX risk with my finance team or adviser? Final Thoughts We’ll be back next week with another round-up. Think of this series as your Monday “heads-up” — a quick scan of what’s happening around the world, and how it might ripple through to your business here in the UK. If you’d like to speak to us about FX strategy, hedging options, or broader financial planning, we’re always here to help.
