LOCAL building firms are suffering at the hands of price inflation, falling consumer optimism and skills shortages, according to trade body Federation of Master Builders (FMB).
The organisation was responding to new UK PMI construction data showing the weakest rise in residential work for two years.
Brian Berry, chief executive of the FMB, said, “With output and optimism hitting lows we last saw at the start of the pandemic, it’s a worrying time for small building firms. Hardworking local builders have been beset by challenges and at a time when they rightly hoped for recovery, things look set to get worse, with inflation on the rise alongside a likely decline in consumer demand for building services as the cost of living crisis bites.
“If the market continues to stagnate, many of these local building firms will face difficulty remaining solvent.”
However, Brendan Sharkey, head of construction and real estate at MHA, said he believes ‘buoyant’ housing demand and good management of supply chain issues mean the construction sector is holding up.
He explained, “The UK construction sector, particularly the residential housing market, is coping relatively well despite the ongoing cost of living crisis. Momentum may have slowed but given the circumstances, the sector is holding up well. The economy may be tough for many but the pandemic was actually good for household savings, allowing people on relatively modest incomes to build up a war chest which they can now put towards a deposit.
“In addition, supply chain issues are no longer causing acute problems. Contractors and developers are usually able to get their hands on construction materials. Construction is a low margin business and some contractors will be running at a loss at the moment but the more financially stable companies are well placed to survive even if market conditions deteriorate.”
Beard Construction believes the current obstacles faced by construction businesses are ‘not insurmountable’.
Fraser Johns, the firm’s finance director, said, “We always knew that the road to sector recovery was not going to be a straightforward one and we will continue to refine and adapt our business practices to deal with the obstacles in our path. These obstacles are certainly not insurmountable, and the pent up demand from the previous year is evident in our healthy order book.
“However, the inflationary challenges are considerable with continued rises in the price of materials like steel, concrete, timber and glass. Nevertheless, that challenge can be met by openness in our the tendering process and by being fair to suppliers and subcontractors, engaging with them early in the tender process and paying them promptly.”