Essay on Impact of economic/financial issues on the construction industry #
Construction industries build projects for residential and commercial facilities. Its ranges start from family home to bigger buildings. The construction companies need to gains their strength by financial upswings. The small construction industries are uniquely taking advantage of the opportunities of counter-cyclical which arise in the time of weak economic stage. Construction industries effect due to less economy. The industry segment gains strength during the economic issues. The new opportunities for building residence based on financial crises.
The construction market is affecting due to financial and economic issues. It is an important source for increasing income — the growing global economic issues are affecting the manufacturing of the building. The construction projects usually have great potential in contributing to socio-economic development for driving the growth. Construction can also use as the safety-net in stimulating economic development (Vu, 2015).
Increasing Costs of the Raw Materials as weakness #
The risks in the cost change are because of the fixed price of home construction. The raw materials and land cost can also change rapidly with the rapid change in the prices. The construction industries are affecting by the less leverage and cost variation in project commences. These economic issues are not affordable by the industries and they are facing losses.
The issues also rise due to the high cost of insurance. Most of the contractors pay very high premiums for the various insurance types. It includes liability for the construction defects, accidents and delays. The increasing costs of insurance can also be crippling to the small construction industries if it is not well for accounting (Vu, 2015).
Lower Economy #
The building’s construction suffers because of the economic downturn and industries decrease their strength. The economy issues retard the development of projects and also influence the overall country condition. Financial issues also include:
- Cash flow issue
When the contractor handles many big projects from different agencies at the same time then the cash flow issue occurs. If the construction industry have an unstable background and they take a bigger project and need a lot of investment but tier financial stage doesn’t allow to do this becomes the reason for the decreasing cash flow. The financial issue also rises due to the lack of regular forecasting of cash flow in the construction industry.
- Payment issues
The construction industry also faces issues when the clients can’t pay proper payment to them due to poor business and financial management. Payment also effects due to the involvement of many parties in one project. Delay in the certification and valuation of payment results in loss to the construction industries. Payments issues create insufficient information and documentation for the valuation. (P, ROJA, & R.RESM, 2017)
- Economic resources issues
The issues that create in getting a loan from the financiers. The difficulties faced by the industries to the legacy of financiers in the time of need. The resources are material resources, equipment resources and human resources. Lack of funds affects projects and delay site possession. If the allocation of the government budget for constructing the building is not in place then financial issues create and effects on the construction industries.
- Market issues
The instability on the financial market causes cash flow issues in the construction project which include increment of the interest rate in the repayment of the loan and costs of labor wages, transportation and material rates. It also includes the increment of the foreign exchange process for the important plants and other materials. (Abdul-Rahman, Wang, & Wong, Project schedule influenced by financial issues: Evidence in construction industry, 2011)
Future aspects of financial issues impact on the construction industry as Strengths #
Construction industries are playing a key role in the development and also in developing economies for the government. These industries have many impotent linkages with different sectors. It impacts on the economic development and GDP that goes very well beyond construction activities contribution. The construction companies can get more promotion and support if the country is not facing any finical issues.
It affects the revenues of the industries. Economic and financial issues affect the materials and fewer workers and employees contract for the project which affects the overall revenue of the companies.
The construction companies are finding themselves shrinking the profit margins and the productivity is unable to generate profit which is necessary for investing in materials that are required for construction purposes. Due to the economic issues, there is a shortage of labor in the industries. And these are so challenging to increase industry growth. However, in the future there is an opportunity the construction industry will have firm support through local companies. The less investor and earning effects construction industries, less will be its profit, but with the local companies and their support in different domains will be an opportunity in the future in the construction industry. (Abdul-Rahman & Takim, 2013)
Financial issues determine major delays in construction. The clients and investors play an important role to reduce the impact of financial problems. I think the financial issues can be solved by identifying the cause and reduced to the effect on the construction industries. The financially related delays of construction should be avoided. The risk management, cash flow management market structure should be affected by accepting all the contracts. Financial and economic issues affects the productivity, performance, profitability and sustainability of the construction companies. And they are challenging the revenue growth of industries.
Abdul-Rahman, H., & Takim, R. (2013). Financial-related causes contributing to project delays. Journal of Retail & Leisure Property, 8, 225-238.
Abdul-Rahman, H., Wang, C., & Wong, S. (2011). Project schedule influenced by financial issues: Evidence in construction industry. Scientific Research and Essays, 6(1).
P, A., ROJA, S., & R.RESM. (2017). EVALUATION ON SOCIO-ECONOMIC FACTORS OF CONSTRUCTION INDUSTRY IN DEVELOPING COUNTRIES. International Journal of Civil Engineering, 6(4).
Vu, H. A. (2015). Impacts of the Financial Factors on Schedule Delays Risk of the International Contracting Projects: Evidence from Highway BOT Pro-jects in Vietnam. World Journal of Engineering and Technology, 3(04), 311.