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Financing for Construction – Making the Case for Investment

Insights from Brendan Morahan’s panel on financing for construction at the inaugural UK & Ireland Construction Forum

By Sarah Hall

Invennt was proud to be a part of the inaugural UK & Ireland Construction Forum hosted at the Leonardo Royal Hotel here in London on September 18th, 2019. This first of its kind event was put on by Business Post Events, alongside partnerships with several associations including the Construction Industry Federation of Ireland, the London Irish Construction Network, the Lighthouse Construction Industry Charity and the British and Irish Trading Alliance, and was designed for anyone in the construction space, particularly those with an interest in both the UK and Irish marketplaces.

The agenda for the event featured many key panellists who opened up the floor for discussions, thought leadership and insights on many significant challenges and opportunities that are facing the construction industry.

The event gave an opportunity for leaders in many different disciplines of the construction industry to delve into the best strategies to preserve and maximise opportunities for further expansion and growth in both the UK and Irish markets.

One of those discussions that are constantly heavy on the minds of every leader in the sector was the financial panel that Brendan Morahan, Director, Invennt, sat on with Gerald Knights, Director of Broking, DRS Bond Management Limited and Jim Power, Economist. They touched on topics such as financing options, competition for capital, debt finance and then dove into what infrastructure may look like in the UK after Brexit and where investment plays a key role in construction.

Jim Power, Economist; Gerald Knights, Director of Broking, DRS Bond Management and Brendan Morahan, Principal, Invennt, on the Financial Panel

When asked about Brexit and its effect on the economy, Brendan spoke about how the industry worries a little bit too much about events like Brexit. “We have had world wars, 911, the economic crash and yet the industry still gets on with it and is continuously built on the survival through major economic scares.

As an industry, we don’t always understand the real impact that we have on society and developing nations. A lot of this talk about uncertainties and risks can be traced back to the fact that often times we don’t help the people who can invest in us to understand that it is both necessary from a social point of view, and when managed properly is a safe investment.”

“For example, many of the Tier 1 organisations have had major shifts in their business models and the way that they can control cash has changed. There has been an over-reliance on trade credit, where it goes all the way across the supply chain and it’s that equity right at the very bottom that is funding the whole industry, and that’s wrong. For us to change the way construction works, this cannot continue. Somehow, we have to make sure that the players in this industry truly understand the part they play in it.

Who is going to have the confidence to really invest in the future and make a strong, persuasive case to get investment behind it? There is a pool of money around the world that is prepared to invest but why would it invest if the business case is failing? Too often we talk about the merits because we see it from our end of the telescope instead of thinking more broadly from an investment and governmental point of view as to what wins votes and what actually ensures a return.”

When we look at it in this respect, it is clear that collaboration between investors and governments is absolutely essential. Brendan mentioned that we need to shift our focus towards working together to get the attention of investors, instead of competing with each other.

When it comes to finding the financing for projects it has become difficult for many companies, and its become essential to be more innovative in the way that you pursue the opportunities available to your business. A key way to do this is by making your business case appealing in order to attract funding without reliance on trade credit, as that isn’t sustainable.

Tier 1’s need to reinvent themselves through the added value that’s available through the supply chain. There are small organizations in particular that are adding immense value but are also funding this industry, and if they understood the value they’re adding then they would be much more confident in exerting themselves.

An example of that is government-funded schemes for R&D tax credits in the UK and Ireland, even in Canada, called SR&ED tax credits, where Invennt have operations now, that promote productivity through innovation. In the UK and Canada, it is very successful, and in Ireland, it’s proven a bit more difficult, however, at Invennt we have experts in the construction industry who are working hard to help companies make claims in Ireland through these R&D schemes.

Brendan left us with some insightful food for thought that leaders in the industry should consider when looking for financing options;

“Through our collective confidence and responsibility, we do brilliant things in this industry which we don’t always classify as R&D, and as a consequence, we don’t always pursue our R&D tax credits. That is a great source of funds that can come in to strengthen our balance sheets to re-invest in the future. If there is one message I want to give out to this industry, its to use your R&D tax credits to re-invest. If you’re not entitled to R&D tax credits, why not? It’s because you’re not being innovative, and if you’re not being innovative, then you’re not going to survive.”

Many businesses do not realise the amount of innovation that they’re doing on a daily basis. The response for some construction companies tends to be, ‘but we are just builders’. What they don’t realise is that R&D isn’t something that’s performed by scientists in white lab coats, it’s performed in daily operations every time you overcome a challenge you face on a project. That is where true R&D lies in the innovation of the construction industry, and that is where Invennt works hard to help you receive the funding you deserve from these important tax credit schemes.

Other panels at the event covered vital subjects such as adding value to the industry, looking towards building the workplace of the future, diversity, technology and its integral role in construction, as well as regional opportunities and forward-thinking plans for the future of construction in the UK and Irish markets.

The inaugural UK & Ireland Construction Forum was a success, and attendees enjoyed an opportunity to network with companies that can lead to fabulous new collaborations bridging across both sides of the Irish Sea. Invennt looks forward to next years’ event and to see the growth and changes that will be implemented throughout the industry over the upcoming year.

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