SME workloads rise despite spiralling costs and labour drought

July 25, 2018 / Isla MacFarlane
SME workloads rise despite spiralling costs and labour drought

Construction SMEs enjoyed rising workloads in the second quarter of 2018, despite continuing concerns over skills shortages and increasing costs, according to the Federation of Master Builders (FMB).

The proportion of firms that reported higher workloads grew to 41% from 32% in Q1, while those reporting lower workloads fell to 18% from 24%.

Businesses are projecting rising activity levels over the next three months, albeit at a slower rate compared with the previous quarter. The share of firms expecting higher workloads dropped to 46% from 49%, while 13% of respondents anticipate lower workloads, up from 10%.

Over the next six months output prices, wages and salaries and material costs are all projected to increase: This is in spite of a deterioration in all three net balances with wages and salaries seeing the greatest decline of 13 percentage points to +53. Employment rose at a faster pace compared with three months earlier.

The proportion of businesses reporting that their workforce went up rose to 21% from 18% while most firms (64%) reported no change in employment.

Brian Berry, Chief Executive of the FMB, said, “The second quarter of 2018 proved to be a positive one for the UK’s builders. Our latest research shows that firms enjoyed stronger growth in workloads than they did in the first three months of this year. Pleasingly, the construction SME sector has now enjoyed more than five years of consecutive growth.

“Furthermore, employment rose at a faster pace in the second three months of 2018 than it did in the first three months. Looking ahead, despite growing political uncertainty and Brexit now less than a year away, construction SMEs remain positive. Businesses are optimistic with nearly half of firms predicting rising activity levels over the next three months.”

Key results from the FMB’s latest State of Trade Survey include:

  • Construction SME workloads remained positive in Q2 2018 and grew at a faster rate than they did in the first quarter of 2018;
  • The construction SME sector has now enjoyed more than five years of consecutive quarterly growth;
  • More than three-quarters (76%) of builders reported increasing material prices in Q2 2018;
  • Two-thirds (65%) of construction SMEs are struggling to hire bricklayers and 60% are struggling to hire carpenters and joiners;
  • More than half (54%) of construction SMEs expect salaries and wages to increase over the next six months.

Berry concluded, “Despite this optimism, the sector should not be too complacent because strong headwinds remain in place. The sector is still contending with rising skills shortages. The latest evidence reveals that nearly all of the key occupations have become harder to recruit in the second quarter of this year compared to the previous three months.

“Bricklayers continue to be the hardest to recruit with nearly two-thirds of firms struggling to hire them, and carpenters not far behind. Without guaranteed access to skilled EU workers, there is a real possibility that skills shortages will further intensify. Skills shortages are also the leading cause of rising wages.

“This, coupled with the fact that margins continue to be squeezed by significant material price increases, should add a cautionary note to these otherwise encouraging findings. While we wait to hear what the post-Brexit immigration system will look like, we are hoping that the Government will listen to the needs of the sector. The construction industry is a cornerstone of the UK economy, so it’s in all of our interests to do what we can to support its small firms.”

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