Demand for SME building work resilient after Brexit, says FMB

The UK-wide survey of the SME construction sector found the balance of overall workloads remained positive in the third quarter of the year, despite Brexit sending jitters through the market.

The net balance of overall workloads among SME builders remained in positive territory for the fourteenth successive quarter, despite falling by 6% in Q3. A positive net balance implies that more respondents are seeing increases than decreases.

While about a third of firms reported higher workloads (down from 37% in Q2), marginally more businesses stated lower workloads (14% vs 13%).

In the housing sector the workload-balance fell 4% to +18 in the quarter, with about 14% of respondents stating lower workloads. However, over half of firms reported no change in workloads.

The net balance for the private new housing sector also remained in positive territory, at +2 but fell 11% in the quarter. A quarter of businesses reported higher workloads, while 23% of private housing firms indicated lower workloads.

FMB chief executive Brian Berry said: “Ongoing workloads for construction SMEs remained remarkably resilient in the months following the referendum vote, suggesting that consumer demand – which accounts for the bulk of SME work – has held up far better than anticipated.

“If we all agree that construction is a ‘weather vane’ industry, and demand for home improvement and new build homes an important gauge of consumer confidence, then our results chime with the cautious positivity demonstrated across construction and the wider housing market.”

Looking forward to the next three months, SME building firms expect a workload reduction of 7% for the second quarter running. However, the balance of the total expected workload was still positive at+12.

The proportion of businesses with negative expectations rose to 18% from 11%, while more than half predicted no change in workloads over the next three months.

Berry added: “Construction bosses will be taking nothing for granted. Growth has softened compared to the buoyant first half of the year and some parts of the UK have gone into decline. In particular, London is flat-lining which is concerning given that it is typically one of the strongest markets for construction SMEs. Our feeling is that the construction skills shortage, which we know is particularly pronounced in London and the South East, is starting to bite.”

Another Brexit problem

The FMB’s figures also showed that almost two-thirds of SMEs are struggling to hire bricklayers and 55% are having a hard time sourcing carpenters and joiners.

This highlights a potential consequence of Brexit, which the FMB said is “the possibility that we will have a less flexible workforce”.

An estimated 12% of construction workers working in the UK are of non-UK origin, forming a vital part of a labour force that is already stretched, Berry said.

He sadded: “Given that the skills gap is only expected to grow over the next decade, it’s vital that talented tradespeople continue to come to the UK. For this reason, we welcome the government’s u-turn on requiring companies to publish data on the percentage of foreign workers they employ. Such a move would send completely the wrong message to foreign workers currently living and working in the UK and those who might consider coming here.”