Real Estate & Construction

Real estate and construction industries stand at the forefront of transformative shifts in the built environment, driven by technological advancements and sustainability goals, including carbon neutrality. These changes, influenced by demographic, environmental, social and health factors, redefine the demand and purpose of offices, retail spaces, warehouses and residential buildings. Together, these dynamics have intensified a division within the major real estate sectors between best-in-class technology and sustainability-focused assets and everything else.

In the UK, the construction sector operates within the Joint Contracts Tribunal (JCT) framework, which delineates rights, obligations and dispute resolution procedures for projects. Margin pressure challenges are fuelled by rising labour and material costs, skilled labour shortages, the reverse VAT scheme, and supply chain disruptions such as delays in material delivery, shortages and price fluctuations. These dynamics all hinder project schedules and budgets. Delayed payments from main contractors exacerbate cash flow issues and strain commercial relationships, project schedules and business operations, making precise financial management and forecasting essential for sustainable profitability.

Practices like retentions, where a portion of payment is withheld until project completion, and negotiated discounts, though beneficial for investors, put pressure on contractors’ cash flow and margins. Additionally, the Construction Industry Scheme (CIS) Gross Payment Status, while advantageous, poses compliance and administrative burdens. Recent contractor failures underscore industry volatility, emphasising the need for robust risk management.

At BTG Advisory we collaborate with real estate and construction entities, their supply chains and financiers throughout business cycles. Our services range from identifying strategies to prevent building obsolescence to conducting diagnostic assessments for cost reduction and working capital optimisation, supporting growth and investment endeavours with independent balance sheet evaluations.