Serious concerns for building sector SMEs

01 Feb 2019

The weakening housing market, rising costs and an increasingly nervous banking sector is restricting growth in the construction industry.

The Federation of Master Builders (FMB) latest State of Trade Survey shows that, while workloads for construction SMEs grew in Q4 2018, there are serious concerns about the mounting problems facing small building firms.

42 per cent of builders have detected signs of a weakening housing market, with one in five construction SMEs having projects stalled in the past three months due to delays to loans, or loan refusals, from the banks.

Also, carpenters have overtaken bricklayers as the trade in shortest supply with nearly two-thirds (64 per cent) of construction SMEs struggling to hire carpenters and joiners and 61 per cent struggling to hire bricklayers.

Looking ahead, the report also shows that expectations for the future weakened for the third consecutive quarter, with just one third (33 per cent) of construction SMEs anticipating higher workloads in Q1 2019 (36 per cent in the previous quarter).

Adding to the concerns, 87 per cent of builders anticipate that material prices will rise further in the next six months, and 66 per cent expect wages and salaries to increase over the next six months (58 per cent in the previous quarter).

Brian Berry, Chief Executive of the FMB comments: “Workloads for small construction firms continued to rise in the last quarter of 2018 but after 23 consecutive quarters of growth, these latest results could mark a tipping point.

“Mounting Brexit uncertainty is starting to have a tangible effect and the indicators are not good with almost half of builders reporting signs of a weakening housing market. 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.”

Berry continues: “Carpenters and joiners overtake bricklayers as the trade in shortest supply for the first time in more than a year. Naturally, these shortages are resulting in workers commanding higher wages and this is causing issues 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.”

At Beavis Morgan, we work with a number of construction businesses, helping them with strategic planning, business turnaround and improving business performance for the future.

Through our partner businesses, BM Structured Finance and BM Advisory, we are able to help with sourcing and restructuring debt finance for SME businesses, as well as assisting with resolving issues which can impact on business performance and success, and finding innovative solutions for businesses and individuals in distress.

For further information about how we can help you and your business, contact Steve Govey or your usual Beavis Morgan Partner.

Further reading:

Building and Construction Services – VAT Note
SMEs must plan ahead for supply chain disruption