The construction sector is being battered by high material prices, a weak pound, private sector uncertainty and a lack of public housing investment, the Federation of Master Builders (FMB) said today.
In the week that sees two of the largest building suppliers release their results, the FMB said that two-thirds of bosses were anticipating further rises in material costs - sentiment that was collected before the Brexit vote.
While the RPI has increased by 0.6 per cent since the end of 2015, data from the Office for National Statistics (ONS) on construction costs indicated an increase of 1.4 per cent over the same period.
“Following the EU referendum, the plummeting value of sterling has further complicated an already difficult situation for small construction firms.
“With the dramatic fall in currency value however, we’re concerned that the trend towards price inflation will gather pace.” said FMB chief executive Brian Berry.
Berry also reiterated the fact that a skills shortage that was putting upward pressure on labour costs.
“Too many are already operating on razor-thin margins and are forced to tender at prices which barely return a profit in order to remain competitive. This leaves little capacity to absorb dramatic price increases,” he said.
The survey said that despite ONS data showing that the construction sector has been in decline since the end of 2015, in the first half of 2016 there had been signs of “an improving overall picture prior to the referendum”.
However the FMB said that the Brexit vote could reverse this trend, affecting the private sector in particular, and called on the government to act.
“A significant programme of publicly-funded capital investment in crucial areas such as housing and infrastructure, along with a renewed focus on improving public procurement processes for SMEs so that they can benefit from these opportunities, would be enough to hush any whispers of a post-referendum recession,” Berry said.