Positivity in construction, building, and engineering despite rising costs

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#Alternative Fuels, #EV
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Right Fuel Card recently surveyed its SME customer base to find out how optimistic different industries are about the future and identify any challenges that businesses are facing.

Most sectors are feeling positive about the next 12 months but the building, construction and engineering industry are particularly confident. This industry still has reservations about alternative fuels; however, steps are being made to combat the current barriers that are preventing the switch to greener technology.

Is the construction industry booming?

According to our survey, 75% of businesses in the building, construction and engineering industry feel optimistic about the future. This is a big improvement from last year when only 45% of respondents had a positive outlook. Although there are various challenges, such as rising costs and a skilled labour shortage, this industry continues to adapt and grow.

graph showing confidence levels of businesses

Commercial building activity on the rise 

Unlike some industries, businesses working in building, construction, and engineering were able to continue during the outbreak of Covid-19. Demand for building services remained high throughout the pandemic as homeowners, in particular, looked to improve their domestic space as homeworking boomed. Although this is now starting to plateau, there are still numerous opportunities available, with commercial building activity, in particular, experiencing growth.

In addition, the UK Government recently committed to building one million houses over the next 2 years which will provide a steady workload and income for businesses in this industry. They’ve also pledged to remove obstacles in the planning system to make it easier and faster for builders to progress with housing developments. With the support of the Government and local authorities, the building, construction, and engineering industry is expected to continue to flourish in the future.

Increasing costs across the board

The future looks bright for those in the building, construction, and engineering industry, however, there are still challenges that need to be overcome. One of the main concerns that respondents in this survey raised was increasing costs. Rising inflation and sky-high interest rates are deterring consumers from purchasing new homes and other buildings, so businesses are offering discounts and upgrades to persuade hesitant buyers. Profits are being impacted as a result, causing some businesses to downsize future projects.   

Following Russia’s invasion of Ukraine, the cost of raw building materials has increased significantly as the rise in fuel costs impacted the cost to import. In addition, the higher demand has made the availability of these materials uncertain, making it hard for businesses to predict future costs.

Skilled labour shortage 

Although many businesses in the building, construction, and engineering industry are optimistic about the future, this survey revealed that the skilled labour shortage was of increasing concern. The construction industry has battled a shortage of labour for the last few years as recruitment struggled to keep up with the ever-growing demand. This has been intensified by an ageing workforce, with 21% of individuals in this industry aged 55 and over. Pressure is therefore mounting on businesses to find new skilled workers to replace those that will soon be retiring.        

The decarbonisation of the construction industry

Recent data shows that the construction industry directly contributes to around 10% of the UK’s CO2 emissions, so it’s becoming increasingly important for businesses in this sector to focus on decarbonisation.  For our customers, it’s clear that this is not yet a priority with 95% stating that they won’t move to alternative fuels in the next 12 months.

graph showing plans to move to alternative fuels

Cost was the main barrier for businesses in the building, construction, and engineering industry but there were also reservations about sustainability and the environmental impact that alternative fuels actually have.

graph showing barriers of alternative fuels

Fuels of the future

Nevertheless, progress is being made in the wider construction industry with many companies, such as Morgan Sindall and Laing O’Rourke, starting to implement zero-emission vehicles on their sites. Electric vehicles require a sufficient charging infrastructure and are currently unable to travel the long distances often required by businesses, so it’s likely that hydrogen and HVO will instead be the fuels of the future for this industry.

The UK Government’s Renewable Transport Fuel Obligation (RTFO) has been encouraging the use of HVO for over a decade as it produces up to 90% fewer CO2 emissions than regular diesel. It is now the leading low-carbon alternative to diesel for transport, plant, and machinery and doesn’t require businesses to invest in new vehicles.

Although HVO is currently the most accessible alternative fuel for this industry, the use of hydrogen is on the rise. These vehicles can be quickly refuelled and produce zero tailpipe emissions, making them an appealing choice for businesses looking to decarbonise their fleets. JCB recently launched a hydrogen-powered backhoe loader for the construction sector and more models are expected to be released in upcoming years. Although investment is being put into hydrogen technology there is still a lot of progress that needs to be made before it can be widely adopted by businesses.

For now, diesel vehicles are the more practical option for businesses in the building, construction, and engineering industry. However, with the development of alternative fuels on the horizon, it’s likely that more businesses will make the switch in the near future.   

The wide range of fuel cards offered by Right Fuel Card can help those in this sector with their fuel expenditure and admin. Use our quick comparison tool to discover the best option for your business or contact our team at 0113 202 5110 to find out more about our products. 

We also plan to introduce a greater selection of fuel cards to help ease the transition to alternative fuels. You can register your interest in our new greener products here.

Note: Survey conducted in May 2023 to business fuel card users, receiving 854 responses.

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Matt Dodds
Head of Strategic Sales and Partnerships

With over 14 years of experience across two of the leading fuel card companies in the UK, Matt Dodds joined RFC Edenred to help lead the development of products to support our customer's move to EV and other alternative fuels, a transition he feels passionately about.