18 May 2018

Latest State of Trade Survey strikes positive note for SME construction firms with five years of growth

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Latest State of Trade Survey strikes positive note for SME construction firms with five years of growth

The Federation of Master Builders’ (FMB) latest State of Trade Survey proves positive for small and medium-sized enterprise (SME) construction firms, despite recent rises in material prices.

The report, delivered by the FMB every quarter, covers the first three months of 2018 and reveals that the workloads of SME’s has grown during this time, showing a rise from 38% to 49% from quarter four of 2017.

These findings are positive news for the sector, despite 90% of builders reporting an increase in material costs, partially attributed to Brexit.

However, the sector has grown at a slower rate than in the FMB’s previous State of Trade Survey. Fewer firms reported an increase in activity in comparison to the previous quarter (32% vs. 35%), while a larger share reported slower activity (24% vs. 15%).

In August 2017, the FMB announced that a significant rise in material prices has resulted in construction costs soaring, finding that almost a quarter of these additional costs had been passed onto the consumer.

It did, however, confirm in early 2018 that consumers were twice as likely to be satisfied with homes undertaken by SMEs, than those produced by large construction firms, findings that perhaps aided sector growth.

Brian Berry, Chief Executive of the FMB, commented on the finding: “…once again, the growth we are seeing is slower than in the previous three months and this can be partly attributed to pressure from rising costs. Insulation, bricks and timber are the materials that have increased the most and builders are predicting that these price increases will continue.”

The report states that these finding “expose continuing threats to the construction sector”, predicting material prices to continue to rise over the next six months, putting further pressure on SME margins.

Despite this concern, the FMB announced that this is the twentieth consecutive quarter of positive growth for SME house buildings, meaning that the SME sector has enjoyed five years of consecutive growth. It also predicting a further rise in workload for the second quarter of 2018.

The FMBs latest research follows a new report from trade body, the Home Builders Federation (HBF), and construction data analyst, Glenigan. Entitled New Housing Pipeline, the report reveals that more than 350,000 new homes in England were granted planning permissions in 2017, the highest figures for more than 10 years. This equates to a rise of 16 per cent between 2016 and 2017, compared to a 20 per cent rise the previous year.

The HBF suggested that permissions “are increasingly on larger sites as local authorities, faced with financial pressures, seek to minimise the number of areas on which development will take place.

“With larger sites typically requiring greater upfront capital and more extensive infrastructure, it can take longer for sites to reach peak build out rates, and small and medium-sized builders are unable to compete for sites.”

Stewart Baseley, Executive Chairman of the Home Builders Federation said the government should encourage councils “to grant permissions on a range of sites by type and size, rather than merely relying on a few larger sites to meet local housing need.”

What the FMBs data shows is that despite difficulties with securing land for development, SMEs are continuing to grow as a sector, despite the ‘Beast from the East’ causing problems across UK construction sites.

Brian Berry concluded: “In 2017/18, 197,000 homes were started in England but this is some way off the Government’s target to build 300,000 homes per year. The FMB has worked closely with the Government to identify how to remove barriers to small local house builders, but these latest results act as a reminder that there is more to be done.

“The FMB would now like to see the continued and speedy implementation of some positive Government policies, designed to bring forward more small sites, properly resource planning departments and increase the flow of finance to SME house builders. If we are to reach our ambitious house building targets, we cannot rely solely on the largest house builders.”

Words: Jen Grimble Images: fmb.org.uk

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