The most recent State of Trade Survey from the Federation of Master Builders (FMB) for Q2 2022 shows that “a staggering 49% of small builders have had a negative impact on their profit margins in the last quarter”.
According to the FMB, “builders are feeling the pinch and seeing their profits tumble as the pressures in the economy mount”. Reflecting on the results of its latest State of Trade Survey, the organisation warns that “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”.
With 49% of small builders experiencing a negative impact on their profit margins in the last quarter and for many small, local tradespeople, these margins are “often fairly tight even in the good times”. The FMB further contends that “without clear political and economic direction during the summer under the caretaker government, the industry will face an uncertain future”.
According to the survey, price rises are “unrelenting” with 98% of builders experiencing material cost increases and 81% passing on these costs to customers. Material shortages and struggles to find skilled labour still plague the sector causing job delays for the majority of FMB members with 71% of builders having delayed jobs due to a lack of materials and 61% delaying work owing to a shortage of skilled tradespeople.
Enquiries for new work are also down, at their lowest levels since the pandemic.
The FMB State of Trade Survey, which is released quarterly, is described as 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 also found:
Impact on net profits
49% of small, local builders have seen a negative impact on profit margins owing to the current economic climate.
Market conditions
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 sharply, tracking in negative territory for the first time since the pandemic.
Skills
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.
Prices
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.
Brian Berry, Chief Executive of the FMB, said: “The statistics in this quarter’s FMB State of Trade Survey make for some grim reading. The industry appears to be at a turning point, and without any movement from a government stuck in paralysis, things will only get worse.
“The new government in September must hit the ground running and deliver ambitious solutions to stabilise the economy. One such solution might be to remove VAT on repair, maintenance and improvement work so that cost savings can be passed on to the consumer.”
Brian continued: “The FMB’s survey also shows that long-term issues persist with materials and skills shortages continuing to delay building work. These issues and rising economic uncertainty don’t leave small, local builders in a good position. Many will need to put up prices to say afloat, but are faced with customers who are unwilling to spend as the costs of living spiral.”
Visit the FMB website for more information and to download the Q2 2022 State of Trade survey.
