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Construction SMEs grow but concerns remain

Words: Laura Edgar
Construction / iStock-48371773

Workloads for construction SMEs grew in the fourth quarter of 2018. Despite this, the industry is concerned that it could be held back by a weakening housing market and rising costs.

It is also thought SMEs could be held back by an increasingly nervous banking sector.

The Federation of Master Builders’ (FMB) latest State of Trade Survey found that 42 per cent of builders have detected signs of a weakening housing market, while one in five construction SMEs has had projects stall in the past three months because of delays to loans or load refusals from banks.

The report states that activity rose at a slower rate in England and Wales than in the previous quarter. There was no change to Scotland's activity
levels when compared with the previous quarter and Northern Ireland was the only home nation to experience activity increasing at a faster rate.

The survey also found:

  • 64 per cent of construction SMEs reported struggling to hire carpenters and joiners while 61 per cent are having difficulty hiring bricklayers. Carpenters overtook bricklayers as the trade in shortest supply.
  • 33 per cent of construction SMEs are anticipating higher workloads in the first quarter of 2019. This is a decline of 36 per cent when compared with the previous quarter.
  • 87 per cent of builders think material prices will rise further in the next six months, and increase from 86 per cent in Q3 of 2018.
  • 66 per cent of construction SMEs expect wages and salaries to increase over the next six months, compared with 58 per cent in the previous quarter.

Brian Berry, chief executive at the FMB, said these latest results could mark a “tipping point”, with mounting Brexit uncertainty starting to have a “tangible effect and the indicators are not good”.

“Furthermore, a worrying one in five construction SMEs has had projects stalled in the past three months due to delays to loans, or loan refusals, from the banks. Together with ever-rising costs due to material price hikes and labour shortages, the headwinds are blowing in the wrong direction for the UK construction sector.”

He said the shortages in workers and resulting calls for higher wages is a worry for construction employers.

“These rising costs, coupled with steadily increasing material prices since the UK referendum, are squeezing the margins of constructions SMEs – making a profit has never been more challenging.”

More than all of this, though, Berry said, “political uncertainty is the enemy of small building firms”, and with less than two months to go until Brexit “we’re none the wiser about what lies ahead”.

He added that if the Immigration Bill remains as it is, the construction industry would not be able to hire sufficient numbers of trades people from abroad and the industry would stall.

State of Trade Survey Q4 2018 can be found here on the FMB website (pdf).

Read more:

SME builders report materials price hike

SMEs struggle to hire bricklayers, suggests survey 

Construction SMEs workload on the rise

SME construction growth slows

Image credit | iStock