The Federation of Master Builders

Sharp slowdown in growth for SME builders

Published date: 23 October 2017

 

Welsh construction firms experienced a sharp slowdown in growth in the third quarter of this year, amid concerns about rising prices and weakening consumer confidence, according to the Federation of Master Builders (FMB) Cymru.

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:

  • In terms of workloads, expected workloads and enquiries, the overall indicator for the performance of Welsh construction SMEs dropped by 20 percentage points in Q3 2017 compared with the previous quarter;
  • 41% of construction SMEs predict rising workloads in the coming three months, down from 48% in the previous quarter;
  • 82% of builders believe that material prices will rise in the next six months;
  • 61% of construction SMEs are struggling to hire carpenters and joiners and 49% are struggling to hire site managers;
  • Over half (58%) of construction SMEs expect salaries and wages to increase in the next six months.

Ifan Glyn, Director of FMB Cymru, said: “There is no room for complacency following a sharp slowdown in growth among smaller construction firms in Wales. A range of factors are at work, most notably the upwards pressure on costs for builders due to the ever-worsening skills shortage and material prices hikes. Furthermore, we have reason to believe that this dampening of growth is also linked to a drop in consumer confidence. Recent research from the Bank of England showed that consumer confidence has decreased in recent months. If consumers are less confident, they are less likely to spend money on extensions, loft conversions, kitchens and bathrooms – the lifeblood of the SME builder.

Glyn concluced: “With Brexit looming large, it’s no wonder that consumers are feeling uncertain about the future. To mitigate this uncertainty, we would encourage the UK Government to use all the levers it has at its disposal to boost consumer confidence. Giving the green light to some large infrastructure projects in Wales, such as the Swansea Bay Tidal Lagoon, would be a great start and what’s more, these projects would have a positive knock-on effect for the wider economy. With businesses also hesitant to invest due to increasing uncertainty, it would help underpin confidence if the UK Government were to forge ahead with investment in key strategic projects.”

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