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Construction SMEs report slowdown in growth

24 Jul 17 Growth among construction’s small and medium businesses slowed down in the second quarter of the year, according to the Federation of Master Builders (FMB).

The FMB’s quarterly State of Trade Survey assesses UK-wide small and medium-sized enterprises (SMEs) in the construction sector.

Q2 2017 was the 17th consecutive quarter of positive growth, which means that the construction SME sector has been growing since Q2 2013. Almost one in two construction SMEs predict rising workloads in the coming three months, with just 9% predicting a decrease in activity.

FMB chief executive Brian Berry said: “Rising material prices and salaries could be starting to dampen growth among construction SMEs. However, it is encouraging to see that the sector has continued to grow despite the recent snap General Election and the resulting hung Parliament. The construction SME sector is particularly vulnerable to any dips in consumer confidence that might come from periods of political uncertainty. It may be that a number of home owners decided to delay any big spending decisions on new extensions or loft conversions while the election campaign was under way – this would account for the slow-down in growth seen in the second quarter of 2017.”

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Most builders - 83% - believe that material prices will rise in the next six months.

Recruitment difficulties are widespread, with 60% of construction SMEs struggling to hire bricklayers; 57% are struggling to hire carpenters and joiners; and 47% are struggling to hire plumbers. Almost two-thirds (62%) of construction SMEs expect salaries and wages to increase in the next six months.

Berry added: “Looking ahead, almost two-thirds of construction firms expect wages and salaries to increase over the next six months and this is in contrast to stagnant wages elsewhere in the economy. Rising salaries are undoubtedly the result of the escalating construction skills shortage – construction workers know their worth and are demanding higher wages from their employers. The majority of construction SMEs are struggling to recruit key tradespeople such as bricklayers and carpenters and we’re seeing shortages in other trades, such as plumbers and plasterers, starting to creep up. With Brexit on the horizon and worrying talk of the so-called ‘Tier 2’ immigration system replacing the free movement of people, the construction industry urges ministers to bear in mind their strategic house building and infrastructure targets before pulling up the drawbridge on EU migrant workers.”

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