Growth in London’s construction industry was held back in the final quarter of 2018 by increasing consumer uncertainty and the skills shortage, both worsened by Brexit, according to the Federation of Master Builders (FMB).
Key results from the FMB’s latest State of Trade Survey, which is the only quarterly assessment of the UK-wide SME construction sector, include:
- London’s construction SME workloads remained positive in Q4 2018 but grew at a slower rate than they did in the third quarter of 2018;
- 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.
Barry Mortimer, Director of FMB London, said: “Growth among London’s construction SMEs slowed in the final quarter of 2018. A range of factors are at play here, not least the growing political uncertainty because of Brexit uncertainty and the prolonged struggle in Parliament. Uncertainty is the enemy of business – particularly so for small businesses. London’s homeowners are delaying decisions on whether to commission home improvement projects and this is contributing to the slowdown of growth. What’s more, almost half of builders reported signs of a weakening housing market in Q4 2018. Brexit-day is now supposedly just two months away, and we are still very much in the dark about what outcome we can expect.”
Mortimer continued: “Financial concerns are another barrier for London’s SME construction firms, and have undoubtedly contributed to the disappointing growth figures in the last three months of last year. Construction firms are facing difficulties accessing the finance they need to build. This latest research reveals that a fifth of construction SMEs have had projects stalled in the past three months due to delays to loans, or loan refusals, from the banks. This, coupled with the ever-increasing costs of materials and salaries mean already razor thin margins are being squeezed.”
Mortimer concluded: “Meanwhile as the Brexit clock continues to tick, the skills shortage is continuing. A third of London’s construction workers are from the EU and if our access to these vital workers is turned off, the skills crisis will worsen. Already, many of London’s SME builders are now finding it increasingly hard to recruit quality tradespeople which in turn is pushing up wage rates. Yet still, the Government ignored the pleas of the business community as it designed its post-Brexit immigration system. To come out of Brexit unscathed, we need the Government to rethink its calamitous post-Brexit immigration policy or else London’s construction sector will grind to a halt.”