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Bleak prospects for SME builders

17 Jul 12 Small and medium-sized enterprises (SMEs) in the construction sector that make up the membership of the Federation of Master Builders saw both their workload and their prospects decline in the second quarter of 2012.

The latest FMB survey revealed that 37% reported lower employment levels in the second quarter and 30% expect reductions in the next six months. Only 22% of respondents have positive expectations for workloads, down from 27% three months ago.

Workloads continued to decline across all sectors although there were positive signs for the private new housing sector:

The net balance for overall workloads remained negative in Q2 2012, although it improved to -16. The proportion of respondents indicating that workloads increased during the three months to June edged up to almost 25%, from 23% in the first three months of the year. Around 35% of firms reported that workloads had remained unchanged, only slightly higher than 33% at the beginning of the year. Net balances improved for the majority of sectors in the three months to June – commercial and public new build were the exceptions – while remaining negative across the board.

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FMB chief executive Brian Berry said: “The results from the latest FMB survey are particularly depressing. After four years of continuous recession in the SME construction sector we would hope to be seeing signs of a return to growth and new job creation, not on-going heavy job losses.”

Mr Berry continued: "The problems affecting the construction sector pose real problems for the wider economy, not just because of the direct cost of unemployment but because of the impact on the industry’s skills base. Evidence from past recessions shows that when people leave the construction industry they tend not to return when the economy recovers. This leaves the construction industry short of skills which in turn delays projects and forces up prices when demand returns to the market."

He concluded: "To help construction SMEs create jobs and promote growth in the construction sector, the government needs to be making bolder policy decisions on a range of policy issues such as reform of the current procurement rules, incentives to promote the forthcoming Green Deal retrofit initiative and a targeted drive to increase house building. Construction industry procurement is a particularly onerous and costly process for small building companies and more must be done to prevent the exclusion of the small businesses that typically use local materials, local labour and promote the development of local skills. Both central and local government need to recognise that value for money is not just about the lowest cost.”

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