UK construction projects are running on average £7.6 million over budget due to legacy inefficiencies, it has been suggested.
Hidden inefficiencies in the construction supply chain are causing UK firms to exceed their budgets by about 46% on average, 250 senior procurement managers reported.
Collection delays for equipment and/or services was one contributing factor, with more than a quarter (28%) of procurement leads saying this led to project setbacks, overall cost inflation and a bloated budget.
The new research may explain why the UK construction industry is experiencing the highest insolvencies of any sector, said construction supply chain management platform YardLink.
It comes amid the news smaller construction firms continue to be overrepresented in the latest industry insolvency figures.
For the past seven recorded months, the number of construction company insolvencies in the UK has fluctuated but remained high, with peak numbers in March and May before coming down slightly in June and July.
Insolvency Service data revealed about 4,280 construction companies in the UK became insolvent in the year to June, a 16.5% increase on the previous recorded year.
And while it is oftentimes specialist sub-contractors and smaller firms in the supply chain that bear the brunt, Tier 1 firms are not entirely immune either.
On average, senior procurement managers consider 11 different quotes before selecting a supplier, they source nearly 170 pieces of equipment per project, and process 85 purchase orders a month, leaders told YardLink.
Sixty-five per cent still do all these tasks using manual processes like basic spreadsheets, or pen and paper.
Construction firms are spending millions of pounds of their budget on the supply chain, excluding labour, compared to retailers (another sector with high insolvencies) who are spending just 31% on raw materials, inventory, and suppliers.
“Many of these inefficiencies actually represent opportunities for contractors and suppliers to work together to create a more prosperous future for the industry. It’s important to recognise that even small improvements could yield big returns. Yet, a mindset shift towards embracing technology will be key,” said Neeral Shah, founder and CEO of YardLink.
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