Small and medium builders in UK see rate of growth slowing

Rising prices for construction materials and higher salaries are resulting in a slowing in growth for small to medium sized builders in the UK, according to the latest figures.

The SME construction sector grew in the second quarter of 2017 but at a slower rate than the first three months of the year, the data from the Federation of Master Builders (FMB) shows.

There are signs that they could be struggling to hire tradesmen due to uncertainty surrounding Brexit and wages could rise, all of which could have an impact on growth going forward at a time when the UK needs new homes.

However, it was the 17th consecutive quarter of positive growth which means that the construction SME sector has been growing for more than four years since the second quarter of 2013.

The majority, almost one in two SMEs in the industry predict rising workloads in the coming three months, with just 9% predicting a decrease in activity but 83% of builders believe that material prices will rise in the next six months and 62% expect wages to increase.

The research also shows that 60% of construction SMEs are struggling to hire bricklayers, 57% are struggling to hire carpenters and joiners and 47% are struggling to hire plumbers.

‘Rising material prices and salaries could be starting to dampen growth among construction SMEs. However, it is encouraging to see that the sector has continued to grow despite the recent snap general election and the resulting hung Parliament,’ said Brian Berry, chief executive of the FMB.

‘The construction SME sector is particularly vulnerable to any dips in consumer confidence that might come from periods of political uncertainty. It may be that a number of home owners decided to delay any big spending decisions on new extensions or loft conversions while the election campaign was underway and this would account for the slowdown in growth seen in the second quarter of 2017,’ he pointed out.

‘Looking ahead, almost two thirds of construction firms expect wages and salaries to increase over the next six months and this is in contrast to stagnant wages elsewhere in the economy. Rising salaries are undoubtedly the result of the escalating construction skills shortage and construction workers know their worth and are demanding higher wages from their employers,’ he explained.

‘The majority of construction SMEs are struggling to recruit key tradespeople such as bricklayers and carpenters and we’re seeing shortages in other trades, such as plumbers and plasterers, starting to creep up,’ Berry added.

‘With Brexit on the horizon and worrying talk of the so-called tier two immigration system replacing the free movement of people, the construction industry urges Ministers to bear in mind their strategic house building and infrastructure targets before pulling up the drawbridge on European Union migrant workers,’ he concluded.

Kindly shared by PropertyWire