Small builders resilient despite material price hikes

The workloads of small and medium-sized (SME) construction firms grew slightly in the first three months of this year despite record numbers of builders reporting rising material prices, according to the Federation of Master Builders (FMB).

Key results from the FMB’s latest State of Trade Survey, which is the only quarterly assessment of the UK-wide SME construction sector, include:

• Construction SME workloads remained positive in Q1 2018 but grew at a slower rate than in Q4 2017
• The construction SME sector has now enjoyed five years of consecutive growth
• More construction SMEs predict rising workloads in the coming three months, up from 38% in the previous quarter to 49% in Q1 2018
• 90% of builders reported increasing material prices in Q1 2018, this is the highest reading on record
• More than half (58%) of construction SMEs are struggling to hire bricklayers and 55% are struggling to hire carpenters and joiners
• Two-thirds (66%) of construction SMEs expect salaries and wages to increase during the next six months, up from 62% in the previous quarter

Brian Berry, Chief Executive of the FMB, said “Workloads for builders continued to grow in the first quarter of 2018 despite the ‘Beast from the East’ wreaking havoc across the UK’s construction sites. However, once again, the growth we are seeing is slower than in the previous three months and this can be partly attributed to pressure from rising costs. Indeed, 90% of builders reported increasing material prices in the first three months of 2018 and this is the highest reading on record. Insulation, bricks and timber are the materials that have increased the most and builders are predicting that these price increases will continue. We are also seeing increased salaries for tradespeople stemming from the acute skills crisis and that, coupled with material price hikes, are squeezing margins and stifling growth for construction firms of all sizes.”

“In terms of house building, these latest results should sound some alarm bells with the workloads of SME house builders dropping off in the first quarter of this year. In 2017/18, 197,000 homes were started in England but this is some way off the Government’s target to build 300,000 homes per year. The FMB has worked closely with the Government to identify how to remove barriers to small local house builders, but these latest results act as a reminder that there is more to be done. The FMB would now like to see the continued and speedy implementation of some positive Government policies designed to bring forward more small sites, properly resource planning departments and increase the flow of finance to SME house builders. If we are to reach our ambitious house building targets, we cannot rely solely on the largest house builders.”