What effect does Recession Have On The Construction Industry,

... contracts, pay off debt, reduce inventories, tighten working capital and review forthcoming budgets. This would also be the opportunity to review the pattern of sales and distribution in preparation for differentiating products and seeking niches.

As the construction industry provides capital goods in many cases then they are likely to be hit badly. This may make firms postpone expansion plans, as they do not need to increase capacity with a falling demand. However, if the finance is available (and this finance would have to come from somewhere other than banks for a small firm like this) then the firm may react to the recession by investing in labour-saving equipment, because in the construction industry especially labour is the major business cost. The reason why this is an unusual reaction though is because expected profits are

making the decision to invest more unlikely.

Another method of raising finances enough to stay in business could be destocking inputs As firms cease to trade, as is the case here, then the stocks of inputs will build up. This will cost more money as the stocks firstly have to be paid for, and secondly they have to be stored somewhere, which also costs more money. So to cut borrowing needs the company can run these stocks down.

One way that could help a small firm stay in business during a depression via the use of pricing policies. With poor trading conditions firms may be able to develop better marketing strategies in order to boost sales to their maximum during this time These pricing policies could include bargaining towards a lower price for the customer to ensure the sale and striking a deal that best suits the current market prospects. Basically any offer that can keep the business ma ...