Growth slows for small construction businesses after General Election jitters hit consumer confidence

Rebecca Smith
There's upward pressure on salaries due to long-term skills shortages in construction
There's upward pressure on salaries due to long-term skills shortages in construction (Source: Getty)

The small and medium-sized construction sector grew for the 17th consecutive quarter from April through to June this year, but the rate of growth has slowed, according to the Federation of Master Builders (FMB).

In its latest quarterly assessment of the UK's small construction businesses, the FMB noted that the sector had been growing for more than four years, but growth had slowed compared to the first three months of the year, with the surprise election in June.

Read more: More than a quarter of construction firms at risk of insolvency

Brian Berry, chief executive of the FMB, said:

Rising material prices and salaries could be starting to dampen growth among construction SMEs.

However, it is encouraging to see that the sector has continued to grow despite the recent snap General Election and the resulting hung parliament.

The construction SME sector is particularly vulnerable to any dips in consumer confidence that might come from periods of political uncertainty.

With the surprise election, Berry suggested a number of homeowners may well have delayed big spending decisions such as new extensions or loft conversions while the election campaign was underway.

Still, nearly one in two construction firms expect rising workloads in the coming three months, with just nine per cent predicting a decrease in activity. Nearly two-thirds expect salaries and wages to rise in the next six months.

Concerns flagged by the sector in the research included that 83 per cent of builders predict material prices will rise in the next six months, and 60 per cent of small construction firms are struggling to hire bricklayers, while over half are finding it tricky to recruit carpenters and joiners.

Berry said the skills shortage was weighing on small firms in the construction sector.

“Looking ahead, almost two-thirds of construction firms expect wages and salaries to increase over the next six months and this is in contrast to stagnant wages elsewhere in the economy. Rising salaries are undoubtedly the result of the escalating construction skills shortage – construction workers know their worth and are demanding higher wages from their employers.”

It comes after recent data from Moore Stephens found more than a quarter of construction firms are at risk of insolvency by 2020.

‚ÄčCompanies building commercial properties were particularly at risk, with 32 per cent facing an increased chance of going bust in the next three years.

Read more: The UK's construction output just fell by the most since 2012

Related articles