Out of the frying pan and into the fire?

06 May 2022

After a turbulent 2 years, Brendan Morahan, co-founder of specialist business consultancy Invennt, explains how Irish construction can insulate itself from international and domestic uncertainty.


Even before the war in Ukraine, running a construction business has hardly been a bed of roses, but as the Irish economy continues to feel the tremors from seismic shifts in international trade and relations, executives across the country are forced to grapple with an ever-growing list of headaches. Brendan Morahan explains the steps businesses can take to insulate themselves from growing international economic uncertainty and emerge stronger on the other side.


“There’s some good news,” Brendan says, “Ireland has the fastest growing economy in the Eurozone and the industry here has proven itself to be admirably sure-footed over the past two years. Yet the financial pressures and contracting environment the industry operates in means that many businesses are sailing close to the wind.”


Indeed, the CIF’s Director General, Tom Parlon pulled no punches at the Oireachtas Transport Committee in April when he said that “no contractor in the world” could withstand the toxic combination of rising costs and sticky prices.  After all, as Tom rightly points out, when materials and labour costs are surging in the private sector, it is incumbent on public sector buyers to share some of that burden and extend an olive branch to their industry partners.


It’s an understandable concern, the re-emergence of war in Europe, Brexit, net-zero commitments, supply-chain disruption and covid variants threaten to upset even the most adroit of operators. However, while the construction industry undoubtedly has some weaknesses it also has an ace up its sleeve.


Brendan elaborates: “We are an industry that has traditionally been undercapitalised, and as a consequence construction has always been subject to the vagaries of economic cycles and hasn’t always been efficient in investing in new technologies and innovations – and there are very good reasons for that because of the slender margins businesses within the sector often operate under.”


But what about that ace up the sleeve? “The unpredictable production environment that causes so many problems for construction also makes us stronger. The industry is distinguished precisely by its ability to respond to unexpected problems. Whether that be inclement weather, unfavourable ground conditions or constrained sites. Construction knows how to deal with disruption and how to innovate its way out of hot water,” Brendan explains.


That brings us onto a vast but currently underused source of potential funds – R&D tax credits. Many businesses operating on both sides of the Irish Sea will be familiar with the UK scheme, but few are aware of the generous relief made available by Dublin. “Not only do these credits give businesses generous cash injections, they incentivise the kind of change that makes firms more durable in the long-term and offer a useful health warning to those that don’t qualify,” Brendan explains.


But why aren’t more businesses availing of the scheme in Ireland? “It’s complicated,” he says. “Many simply aren’t aware of the scheme, but many more have been misinformed about its scope, and that is largely a product of how accountants have interpreted the tax code.” Lots of people, including many in the industry, simply don’t realise that construction is fertile ground for the types of pioneering activity that qualifies for the scheme and many more are hesitant to claim out of fear of lengthy investigations by the Revenue. “We have all our reports checked by a former president of the Irish Tax Institute and we’ve never had a claim rejected,” Brendan says reassuringly.


But Invennt doesn’t just do tax, in addition to helping businesses interpret the tax code, Invennt seeks to “analyse organisations to identify where they have, particular competitive strengths and help them leverage them”, Brendan says. Typically, Brendan finds that “a lot of companies have either started off quite small and grown quite quickly almost to their own surprise and have got to a level without a detailed strategy and have suddenly hit a point at which they don’t really know how to take it to another level, making them vulnerable”. On the other hand, Brendan says, there are “other businesses that have been around for a long time who have a strategy on paper, but it hasn’t really been tested and prodded and probed to check that it’s fit for purpose”.


That’s a precarious position at the best of times but in the turbulent market conditions the industry now finds itself in, indifference to strengths or hubris about weaknesses could prove fatal. Brendan explains, “One of the mantras we’re always pushing with our clients and prospective clients is to really look hard at what your strategy is and how you are going to compete now, and in the future, and we obviously seek to provide help with that, by stimulating that debate and independently critiquing what they come up with.”


Ultimately, Brendan’s focus is helping firms in “delivering your business effectively”, which, he says, may “sound obvious”, but “quite often we get involved in businesses and when we start to get under the bonnet, you find that they’re doing work, but not very successfully, and unsurprisingly, because they’ve won the sort of work that they should never have really been going for”.


Invennt is committed to providing businesses with more than a one-off health check though: it seeks to create systems that give businesses the tools to course correct at a pace that is commensurate with the fast-changing sector and economy more broadly. “What we always say is that a business health check isn’t just a point in time”, Brendan says, this is a data-led system to monitor progress, give feedback, and affect change in real time.


“Data” is the operative word. Invennt take a scientifically rigorous approach and that requires hard facts. Fortunately, Invennt has a robust process to gather and interpret this data, turning it into useful insight. Brendan explains, “Most of the businesses that we work with have no shortage of data, but a lot of that data is not really usable, so we’ve developed a tool to help clients identify what data they need, how they can capture that and turn it into a meaningful dashboard. So, if it’s going to plan, they keep going, if it’s not, they know they need to do something about it.”


The challenges of the 21st century loom large, whether it be tackling climate change, dealing with disrupted supply chains, oil shocks or political turmoil – the task ahead of the construction industry is monumental. So, while it might feel like businesses are jumping out of the frying pan and into the fire, with the right tools and attitude, Brendan is convinced that the sector has the resolve to meet these challenges, use them as opportunities to grow, create new practices, and thrive in the future.





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