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Business for the UK's small and medium-sized builders grew for the sixteenth successive quarter according to the Federation of Master Builders' (FMB) 'State of Trade Survey' for the second quarter of 2003. There is a positive outlook, in the short-term at least, with workloads and employment levels expected to increase in the third quarter. However, whilst builders are looking to take on more staff to meet rising demand, almost three quarters of those surveyed reported difficulties recruiting both directly employed and sub-contracted skilled labour, restricting further growth opportunities.
The second quarter figures, the strongest since the third quarter of 2001, saw the workloads of small to medium-sized construction companies grow significantly. 38% of the FMB members polled reported an increase in workload with just under half reporting that work levels remained steady. Future expectations for new business and employment are optimistic.
Despite the healthy levels of growth seen in the second quarter and high expectations amongst respondents for the short-term future, the over-riding issue facing building SMEs remains the chronic shortage of skilled labour. Whilst just over a quarter of those surveyed expect to increase their workforce in the third quarter, 72% of all builders reported difficulty in sourcing skilled labour in the second quarter - the second highest figure since the present survey format was introduced four and a half years ago.
"It is good to see that consumer confidence remains strong and that business is healthy" said FMB director general Ian Davis. "One factor certainly contributing to the continued growth is the increased awareness of the FMB and its members that our consumer awareness campaign established in the latter stages of the second quarter. We have already seen new business leads via our Find a Builder service increase by a third since the beginning of May. Whilst this growth is great news for our members and the UK construction industry, the high percentage reporting difficulties sourcing labour will increase pressure on existing workers and compound an already unsatisfactory situation. Training, recruitment and promoting the benefits of careers in construction are key issues which the FMB, along with its industry and Government partners, is working hard to resolve."
Work in the private housing sector, both new build and the repair, maintenance and improvement (RMI) of existing properties, is the main driver of the continuing growth. Almost a third of builders reported an increase in domestic RMI work and just over a quarter saw growth in private new build housing work. Work on commercial buildings and the refurbishment of non-residential buildings for private sector clients also performed well. The weakest sectors in Q2 were public sector new build and RMI work, and non-residential public sector works.
Looking forward, builders expect the market to remain buoyant in the foreseeable future. 87% of respondents expect to either increase or maintain current work levels. New business leads were positive for all types of work except the new build and refurbishment of industrial buildings. The strongest expectations for future workload increases were in the domestic RMI sector, followed by the new build and refurbishment of commercial property. When asked about new business enquiries in April, May and June, four out of ten builders reported higher levels, the strongest sector being the repair, maintenance and improvement of private housing.
Accompanying the increase in workload there was some growth in the size of the workforce of many survey respondents. However, the rise was not as great as was predicted in the previous survey, on account of the aforementioned skill shortages, which are limiting the amount of new or additional work builders are able to take on. Consistent with the indications of a further tightening of the labour market situation, skill shortages, recruitment and training dominate the list of issues that survey respondents are facing.
Commenting on future prospects Ian Davis said:
"While there are no indications in the survey of a slow down in construction work, economic indicators such as static or less rapidly rising house prices, a fall in the number of first time buyers and volatile retail sales may be signs of more moderate growth over the next six to twelve months."
First posted: 5 August 2003. Last modified: 5 August 2003.
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