Small and medium sized builders in the UK remain positive about the construction outlook but the number of new homes being built is slowing and costs are continuing to have an impact.
Overall construction grew at a slower rate in the third quarter of 2018 compared to the previous quarter, according to the latest state of the trade survey from the Federation of Master Builders, the only quarterly assessment of the SME building sector.
Overall some 32% of members reporting rising workloads compared with 41% in the second quarter of the year and activity rose at a slower pace in England, Scotland and Northern
Ireland, with Wales being the country to see activity increasing at a faster rate.
There have been 22 consecutive quarters of positive growth, which means that construction SME workloads have now been on the rise for more than five and a half years, but there are still challenges, the survey also shows.
Indeed, some 86% of builders believe that material prices will rise in the next six months, 58% foresee wage increases over the next six months, up from 54% in the previous quarter and 68% are struggling to hire bricklayers, a peak figure last reached in the fourth quarter of 2017, while 59% are struggling to hire carpenters and joiners.
According to Brian Berry, FMB chief executive, a number of factors are contributing to the current outlook. ‘Anecdotally, we are hearing worrying reports of banks withholding previously agreed funding for projects which is delaying start dates and dampening growth. This may or may not be related to Brexit nerves,’ he said.
‘The construction skills shortage is also taking its toll. More than two thirds of construction SMEs are struggling to hire bricklayers and brickies are easily the most sought after tradespeople in the building industry currently. These latest figures match the highest we’ve noted since records began a decade ago,’ he pointed out.
‘These skills shortages are also leading to projects being stalled because there physically aren’t enough people to build them. Worse still, the scarcity of trades means that when construction employers can find people, they are paying huge salaries which is putting further pressure on margins,’ he added.
The survey also shows that expectations for the future have become weaker with 36% of respondents forecasting higher workloads, down from 46% in the previous quarter. In contrast, those predicting no change to workloads grew, to 51% from 41%.
Berry believes that the slowdown in growth should ring alarm bells for the Government and give rise to a total rethink of its post-Brexit immigration proposals. ‘Currently, the Government wants to significantly limit the number of construction workers coming into the UK post-Brexit, labelling them low skilled and therefore somehow surplus to requirements,’ he explained.
‘Migrant construction workers are indispensable with 13% of our construction workers being from outside of the UK. If construction firms are unable to hire migrant workers post Brexit, the already severe skills crisis will worsen. This will mean we won’t be able to the build the new homes the Government is keen on delivering and infrastructure projects will grind to a halt,’ he said.
‘It is imperative that the post-Brexit immigration system allows construction firms to continue to hire workers of varying skill levels. We hope the Government heeds the warning that these latest results show, before it is too late,’ he added.
