The FMB’s state of trade survey for the first quarter of 2019 shows that the array of problems faced by small, local builders have taken their toll and have now put the sector in negative territory.
Overall workloads for FMB’s membership of small and medium-sized enterprises (SMEs) declined for the first time in six years. Although 49% of respondents indicated that there had been no change in workload between the end of 2018 and the start of 2019, 29% said workload had slowed. The comparable figure for the previous quarter was just 13%.
However, there is general optimism that the slowdown is just a blip and expectations for the future have strengthened with 41% of firms forecasting higher workloads over the coming three months, up from 33% in Q4 2018. In contrast, those predicting lower workloads dropped from 19% to 16%.
With the slowdown, skills shortages eased slightly among some occupations, although 64% of respondents are still finding bricklayers in short supply. Carpenters/joiners, plumbers and site managers were also hard to come by. As is usually the case, scaffolders were the easiest to hire.
There is near unanimity of the inevitability of material prices rising further in the next six months, with 88% of builders anticipating that.
Other costs are expected to rise too; 71% expect wages and salaries to increase over the next six months, up from 66% in the previous quarter.
FMB chief executive Brian Berry said: “This dip follows three years of political uncertainty, which have taken their toll on the SME construction sector. We knew anecdotally that the first three months of this year had been less busy for many of our members and our latest research confirm this. A perfect storm of diminished consumer confidence, rising material prices and increases in wages and salaries has resulted in the construction SME sector detracting for the first time in six years. These results are also very much in line with recent stats from the ONS [Office for National Statistics] and PMI [Purchasing Managers’ Index] data, all of which point to a wobble in the construction industry. Consumers and businesses alike are understandably putting off large investment decisions while the never-ending Brexit negotiations rumble on.”
Mr Berry continued: “Interestingly, skills shortages in the first three months of this year have lessened slightly. This is the silver lining to reduced workloads in some parts of the sector – as workloads have declined, there has been less competition for tradespeople for those firms with lots of projects underway. However, what is less positive is that almost three-quarters of small building firms expect wages and salaries to increase over the next six months. Worse still, our latest research reveals record-breaking results for expected material price rises with almost 90 per cent of firms predicting that they will increase further in the coming months. This is bad news for builders and consumers alike as construction projects, large and small, become more expensive to deliver.”
He concluded: “The government must do what it can to boost the economy during this time of political uncertainty and that’s why we’re calling for a reduction in VAT from 20% to 5% on all housing repair, maintenance and improvement (RM&I) work. Reducing VAT on RM&I work could boost the UK economy by more than £15bn over a five-year period, according to independent research by Experian. This reduction in VAT could also create more than 95,000 jobs and save 240,000 tonnes of carbon dioxide from thousands of homes. Such a VAT reduction has the backing of more than 60 charities, trade associations, business groups and financial firms as there is no other policy that would achieve so many of the government’s economic, environmental and social aims with so little cost to the public purse. At a time of continued political uncertainty and a dip in construction output, a VAT reduction for RM&I is exactly what the UK economy is crying out for.”