Builders are feeling the pinch, seeing their profits tumble as the pressures in the economy mount.
Small, local builders are facing an uncertain few months ahead with growing concerns about insolvencies, as they tackle increasing inflation, the knock-on effects of the war in Ukraine and a customer base looking to tighten its belts.
In the most recent State of Trade Survey from the Federation of Master Builders (FMB), a staggering 49% of small builders have had a negative impact on their profit margins in the last quarter. For many small, local tradespeople, these margins are often fairly tight even in the good times.
The FMB warns that without clear political and economic direction, during the summer under the caretaker government, the industry will face an uncertain future.
Price rises are unrelenting with 98% of builders experiencing material cost increases and 81% passing on these costs to customers. Material shortages and struggles to find skilled labour still plague the sector causing job delays for the majority of FMB members. 71% of builders have delayed jobs due to a lack of materials and 61% are delaying work owing to a shortage of skilled tradespeople. Enquiries for new work are also down, at their lowest levels since the pandemic.
The FMB State of Trade Survey, which is released quarterly, is the only survey of its kind to track the experience of small to medium-sized (SME) construction firms in the UK. The latest survey for Q2 2022 found:
Impact on net profits
- 49% of small, local builders have seen a negative impact on profit margins owing to the current economic climate.
Market conditions
- 71% of small builders have delayed jobs because of a lack of materials.
- 61% of FMB members have delayed jobs due to a shortage of skilled tradespeople.
- Significantly fewer FMB members report a rise in enquiries, across all areas of work, compared to the last quarter.
- Housebuilding enquiries are down sharply, tracking in negative territory for the first time since the pandemic.
Skills
- 42% of FMB members are finding it difficult to hire bricklayers, up 2% on last quarter.
- 42% of builders are struggling to hire carpenters/joiners, down 3% on last quarter.
Prices
- 98% reported an increase in material costs in Q2 2022.
- 95% of respondents expect material costs to increase in Q3 2022.
- 81% of builders have put up their prices for work.
Brian Berry, Chief Executive of the FMB, said: “The statistics in this quarter’s FMB State of Trade Survey make for some grim reading. The industry appears to be at a turning point, and without any movement from a government stuck in paralysis, things will only get worse. The new government in September must hit the ground running and deliver ambitious solutions to stabilise the economy.
“One such solution might be to remove VAT on repair, maintenance and improvement work so that cost savings can be passed on to the consumer
“The FMB’s survey also shows that long-term issues persist with materials and skills shortages continuing to delay building work. These issues and rising economic uncertainty don’t leave small, local builders in a good position. Many will need to put up prices to say afloat, but are faced with customers who are unwilling to spend as the costs of living spiral.”
