Southern SME builders under increasing pressure, says FMB

Rising material costs, a subdued housing market and an increasingly anxious banking sector could stifle construction industry growth, the Federation of Master Builders (FMB) has warned.

According to the Federation’s latest State of Trade Survey, workloads for southern SME builders remained broadly positive throughout Q4 2018. However, the FMB has raised serious concerns about the pressures SMEs now face.

In answer to the quarterly survey, 42% of SME builders said they had ‘detected’ signs of a subdued housing market first-hand. Complicating matters, one in five reported having a project stall in the past three months due to delayed loans or flat-out refusals from banks. The skills shortage also continues with carpenters overtaking bricklayers as the trade in shortest supply. Nearly two-thirds (64%) of SME builders have struggled to source carpenters or joiners, while 61% have had difficulty hiring bricklayers.

In response, expectations for the future have fallen for the third consecutive quarter. Just one-third (33%) of SME builders anticipate higher workloads during Q1 2019, down from 36% the previous quarter. 87% believe material prices will rise further in the next six months, up slightly from 86% in Q3 2018. Two-thirds (66%) expect wages and salaries to increase over the next six months however, up from 58% in the previous quarter.

According to Phil Hodge, Director of FMB South: “The developing skills crisis in particular is holding builders back in the south of England. There are rising shortages of carpenters, bricklayers and joiners, with two-thirds of firms struggling to hire in these key trades. A simple case of supply and demand means that these shortages are resulting in workers commanding higher wages which in turn puts pressure on margins for southern construction employers.

“Continued inflows of EU workers have so far served to mitigate this shortage and help the industry and economy continue to grow. But without this access to EU labour, there is a real possibility that skills shortages will further intensify, threatening the delivery of new housing with a knock-on effect on growth across the wider economy. The government therefore needs to seriously re-think the disastrous Immigration White Paper before irreparable damage is done.”

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