Sustained high levels of inflation, increasing interest rates and weak consumer confidence makes for a difficult landscape to navigate for any house builder or other company in the construction sector. This is what was cited by the Times, as the board of Marshalls' reasoning for a £9 million cost saving exercise, that will see 250 job losses and a shutdown of its factory in Carluke, Lanarkshire (a town that coincidentally one of my closest friends grew up in and will no doubt have a huge impact on the community).

I wrote a few months ago about the profit warnings Marshalls issued in H1, and the subsequent raised eyebrows in the city and  sector as a result of the plc issuing said warning.  Established in the 1890s, Marshalls is a leading British maker of products for housing, and its work includes the build out of the athletics village for the 2012 Olympic games. They employ over 2,00 people.

So it is a pertinent issue for a plc of this size to continue to post profit warnings after H2 was forecasted for a bounce back. For many, including The Times' David Smith who picked up on the news about Marshall at the weekend, this is a sign of the current economic times, notably saying ‘New gross domestic product (“GDP”) figures will be out this week, but something extraordinary would have to happen to change the current economic picture. In May – the latest figures – monthly GDP was 0.4 per cent below May 2022. The big picture is stagnation.’

So what else makes the Marshalls case so significant?

It is a barometer of where the industry is heading, and it creates unease within the sector, which in turn may have several negative ripple effects, I have listed some of these below:

1. Job cuts in general reduce the disposable income that people have which in turn decrease spending, which may help the rate of inflation, but it will hurt businesses in other sectors of the economy. The more jobs cuts the more businesses hurt.
2. The Marshalls job cuts could make it difficult for other construction companies to complete projects on time and on budget. Only last week in the Barratt development where I bought a flat a little under three years ago on the old West Ham United Stadium, we were told that the final stages of a memorial walk was severely delayed, as a result of other construction firms going insolvent. The chain reaction leads to delays and cost overruns, which further hurts the economy.
3. The job cuts could discourage people from entering the construction industry, which could exacerbate the labour shortage in the sector.

The current situation at Marshalls is a stark reminder of the ongoing fragile and unpredictable nature of the UK economy. But despite the construction industry facing a number of challenges, there are also a number of opportunities for innovation and growth.

Modular construction (pre-fabricated building off-site that are assembled on-site), net-zero building innovation, and technology such a drones and 3D printing increasing safety and efficiencies all provide opportunities for growth. The UK government will need to help with these opportunities, partly by reducing regulation, and investing further in infrastructure – but the point is there are opportunities.

There is always something that we can do, even on the precipice of collapse, a choice that can have an impact – small or big. It is just about getting the clarity of thought the right support around you. No easy task when facing the pressure of choosing between people’s livelihoods or the ongoing waning financial performance of a plc.

It remains to be seen what will happen to Marshalls in the long run, especially if circumstances in the market (which are outside of the board’s control), continue to worsen. There are lots of practical tools and safeguards companies can take to help minimise the negative impact, and this is something that we always discuss with our clients when they arrive at our door, at the stressed stage of their companies lifecycle.

To be continued, no doubt…