SME builders ‘feeling the pinch’ as cost and labour pressures grow

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BUILDERS are experiencing a drop in profits as economy pressures rise, according to new research.

The most recent State of Trade Survey from the Federation of Master Builders (FMB) found that small, local builders face an uncertain few months with growing concerns about insolvencies, as they tackle inflation, knock-on effects of the war in Ukraine, and a customer base looking to tighten its belts.

49% of small builders revealed these issues have had a negative impact on their profit margins in the last quarter. The FMB is now warning that that without clear political and economic direction, the industry will face an ‘uncertain future’.

98% of builders said they are experiencing material cost increases, with 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 admitted they have delayed jobs due to a lack of materials, while 61% are delaying work owing to a shortage of skilled tradespeople. Enquiries for new work are also at their lowest levels since the pandemic.

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.”