Growth in the construction industry could be held back by a weakening housing market, rising costs and an increasingly nervous banking sector, according to the Federation of Master Builders (FMB).

 

The FMB’s latest State of Trade Survey showed that workloads for construction SMEs grew in Q4 2018. Despite this, there are serious concerns about the mounting problems facing small building firms, including:

 

  • 42% of builders have detected signs of a weakening housing market;

 

  • One in five construction SMEs have had projects stalled in the past three months due to delays to loans, or loan refusals, from the banks;

 

  • Carpenters overtake bricklayers as the trade in shortest supply with nearly two-thirds (64%) of construction SMEs struggling to hire carpenters and joiners and 61% struggling to hire bricklayers;

 

  • Looking ahead, expectations for the future weakened for the third consecutive quarter, with just one third (33%) of construction SMEs anticipating higher workloads in Q1 2019. This is down from 36% in the previous quarter;

 

  • 87% of builders anticipate that material prices will rise further in the next six months, slightly up from 86% in Q3 2018;

 

  • Two-thirds (66%) of construction SMEs expect wages and salaries to increase over the next six months, up from 58% in the previous quarter.

 

Brian Berry, Chief Executive of the FMB, said: “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. Furthermore, a worrying one in five construction SMEs has had projects stalled in the past three months due to delays to loans, or loan refusals, from the banks. 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 continued: “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.”

 

Berry concluded: “But more than anything, political uncertainty is the enemy of small building firms. Most construction SMEs work predominantly in the refurbishment sector and they rely heavily on the confidence of homeowners to spend their cash on home improvement projects. There is clearly a desperate need for political certainty but with less than two months to go until we leave the EU, we’re none-the-wiser about what lies ahead. Brexit deal aside, the Government is also happily ignoring the views of business as it designs its post-Brexit immigration system. If the Immigration White Paper remains as is, the construction industry will not be able to hire sufficient numbers of tradespeople from abroad and the industry will stall. The Government’s house building targets will therefore be no more than a fantasy.”

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