FMB Scotland calls for budget boost after stagnant summer for construction firms

Growth among Scotland’s small construction firms slowed in the third quarter of this year with materials prices and labour shortages continuing to squeeze margins.

The latest quarterly State of Trade Survey from the Federation of Master Builders (FMB) found that the pace of growth among Scotland’s construction SMEs slowed in Q3 2018 compared with the previous quarter.

Other key results from the survey, which is the only assessment of the UK-wide small and medium-sized (SME) construction sector, include that 86% of builders reported increasing material prices in Q3 2018, up from 76% in Q2 2018, and that more than two-thirds (68%) of construction SMEs are struggling to hire bricklayers and 59% are struggling to hire carpenters and joiners.

More than half (58%) of construction SMEs expect salaries and wages to increase over the next six months.

Activity rose at a slower pace compared with the previous quarter in England, Scotland and Northern Ireland, with Wales being the only home nation to experience activity increasing at a faster rate.

Gordon Nelson, director of FMB Scotland, called for provisions to be made in the upcoming Scottish budget to help access to finance for construction SMEs.

He said: “Scottish construction firms experienced a dip in growth during the summer compared to the previous quarter. There are many factors at play here that have contributed to these somewhat disappointing results. The introduction of the new income tax rates and bands in April in Scotland appear to have had an impact on construction firms as our sector’s health links closely with levels of consumer confidence and spending power.

“Home owners are the lifeblood of local builders who rely on people commissioning extensions, loft conversions, kitchens and bathrooms. Some Scottish home owners may have compensated for lower household budgets by postponing any planned improvement projects.”

Nelson added: “The worsening skills shortages has also dampened growth among SME firms in Scotland. More than two-thirds of firms are struggling to hire bricklayers and nearly as many are facing difficulties hiring carpenters and joiners. What’s more, wages have continued to rise because of this increasing scarcity of skilled tradespeople. This coupled with the fact that material prices continued to soar in the previous quarter with ten per cent more firms reporting this problem in the third quarter of the year compared with the second.

“This has undoubtedly led to the margins of Scottish construction firms being squeezed. We will watch with interest to see whether the cabinet secretary for finance, Derek Mackay MSP will bring forward policy announcements in the Scottish budget in December to make access to finance easier for construction SMEs, thereby unleashing their economic potential.”

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