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Thu December 13 2018

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Builders stay busy but profits under pressure

25 Jul Latest state of trade survey from the Federation of Master Builders shows workloads continuing to rise but contractors are braced for costs to spiral and margins to evaporate in the months ahead.

Workloads grew at a faster rate in the second quarter of 2018 than they did in the first quarter but 76% of builders reported increasing material prices.

The Federation of Master Builders (FMB) represents the small and medium sized enterprises (SMEs) that characterise the bulk of the contractors in the industry.

Two-thirds (65%) of construction SMEs are struggling to hire bricklayers and 60% are struggling to hire carpenters and joiners, the latest quarterly survey of FMB members found. More than half (54%) of firms expect salaries and wages to increase over the next six months.

In the second quarter of 2018, SME workloads recorded rising activity. The proportion of firms that reported higher workloads grew (41% vs. 32%), while those reporting lower workloads fell to 18% from 24%.

Businesses are projecting rising activity levels over the next three months, albeit at a slower rate compared with the previous quarter. The share of firms expecting higher workloads dropped to 46% from 49%, while 13% of respondents anticipate lower workloads, up from 10%.

FMB chief executive Brian Berry said: “The second quarter of 2018 proved to be a positive one for the UK’s builders. Our latest research shows that firms enjoyed stronger growth in workloads than they did in the first three months of this year. Pleasingly, the construction SME sector has now enjoyed more than five years of consecutive growth. Furthermore, employment rose at a faster pace in the second three months of 2018 than it did in the first three months. Looking ahead, despite growing political uncertainty and Brexit now less than a year away, construction SMEs remain positive. Businesses are optimistic with nearly half of firms predicting rising activity levels over the next three months.”

He concluded: “Despite this optimism, the sector should not be too complacent because strong headwinds remain in place. The sector is still contending with rising skills shortages. The latest evidence reveals that nearly all of the key occupations have become harder to recruit in the second quarter of this year compared to the previous three months. Bricklayers continue to be the hardest to recruit with nearly two-thirds of firms struggling to hire them, and carpenters not far behind. Without guaranteed access to skilled EU workers, there is a real possibility that skills shortages will further intensify. Skills shortages are also the leading cause of rising wages. This, coupled with the fact that margins continue to be squeezed by significant material price increases, should add a cautionary note to these otherwise encouraging findings. While we wait to hear what the post-Brexit immigration system will look like, we are hoping that the government will listen to the needs of the sector. The construction industry is a cornerstone of the UK economy, so it’s in all of our interests to do what we can to support its small firms.”

MPU

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