Builders seeing profits tumble as economy pressures mount, warns FMB Scotland
Small, local builders are facing an uncertain few months ahead with growing concerns about insolvencies, as they tackle increasing inflation, the knock-on effects of the war in Ukraine and a customer base looking to tighten its belts.
In the most recent State of Trade Survey from the Federation of Master Builders (FMB), a staggering 49% of small builders have had a negative impact on their profit margins in the last quarter. For many small, local tradespeople, these margins are often fairly tight even in the good times. The FMB warns that without clear political and economic direction, during the summer under the caretaker government in Westminster, the industry will face an uncertain future.
The new data from Scotland indicates a moderate increase in building activity in Q2 2022, with 39% reporting increased workloads. This is a healthy rise to those reporting an upturn in workload in Q1 2022, which stood at 31%. The survey also suggests that Scottish small builders experienced an improvement in enquiries in Q2, with 35% reporting a rise, compared to 27% in Q1 2022. This puts an increase in reported enquiries in Scotland ahead of all UK nations, which is in sharp contrast with the last quarter when Scotland trailed.
The FMB State of Trade Survey, which is released quarterly, is the only survey of its kind to track the experience of small to medium-sized (SME) construction firms in the UK. The latest survey for Q2 2022 found:
Impact on net profits
- 49% of small, local builders have seen a negative impact on profit margins owing to the current economic climate.
Scottish market activity
- Builders that reported increased workload compared to last quarter sits at 39%.
- 35% reported a rise in enquiries compared to the last quarter.
- 71% of small builders have delayed jobs because of a lack of materials.
- 61% of FMB members have delayed jobs due to a shortage of skilled tradespeople.
- Significantly fewer FMB members report a rise in enquiries, across all areas of work, compared to the last quarter.
- Housebuilding enquiries are down significantly, tracking in negative territory for the first time since the pandemic.
- 42% of FMB members are finding it difficult to hire bricklayers, up 2% on last quarter.
- 42% of builders are struggling to hire carpenters/joiners, down 3% on last quarter.
- 98% reported an increase in material costs in Q2 2022.
- 95% of respondents expect material costs to increase in Q3 2022.
- 81% of builders have put up their prices for work.
Gordon Nelson, director of FMB Scotland, said: “It is encouraging that our members are reporting busy workloads and are receiving a healthy number of enquiries. However, the ability of builders to fulfil demand remains a tall order. The work is there, but they are struggling to find skilled labour to carry it out and building material costs remain volatile.
“Elsewhere in the UK, there are signs that wider economic trends are starting to have an impact on consumer confidence with members suffering a drop in enquiries. My concern is that this could be a sign of things to come and, although for this quarter, Scotland has bucked the trend, it is unlikely to be the case for long. Caretaker Government or not, now is the time for the UK Government to act before the rot sets in.”