What's Happening?
Modebest, a London-based concrete specialist, has reported a 41% drop in pre-tax profit due to rising costs and delays related to building safety legislation. The company's pre-tax profit fell to £870,670
for the year ending January 31, 2025, compared to £1.4m the previous year. Despite an increase in turnover from £77.5m to £84.5m, the firm's profit margin shrank from 1.8% to 1%. Modebest attributes the decline to a 10% rise in overheads, including increased wage bills due to a higher headcount. The introduction of the Building Safety Act has significantly reduced the release of work in their specialized area, affecting operations since 2024.
Why It's Important?
The decline in Modebest's profits highlights the broader challenges faced by the construction industry due to regulatory changes. The Building Safety Act, aimed at improving safety standards, has led to delays in project approvals, impacting companies specializing in high-rise residential buildings. This situation underscores the tension between regulatory compliance and business profitability, as firms navigate increased costs and operational hurdles. The construction industry, a key economic driver, may experience reduced growth and investment if such regulatory delays persist, affecting employment and regional development.
What's Next?
Modebest is actively diversifying its revenue streams by tendering and negotiating projects outside its traditional specialism and location, which are not affected by the new legislation. The company aims to navigate the current downturn in demand by leveraging its strong cash position. The Building Safety Regulator has announced plans to clear its backlog of legacy gateway two applications by January, which may alleviate some of the delays affecting Modebest and similar firms. Industry stakeholders will be watching closely to see if these measures lead to improved project approval timelines.
