Higher costs and material shortages threaten SME builders

Gurjit Degun
posted by Gurjit Degun
30 April 2014

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30 April 2014 | Gurjit Degun

Rising building costs and a shortage of materials are threatening economic recovery in the SME construction sector.

That’s the view of the Federation of Master Builders (FMB), which said this is causing “serious concern” in the industry. FMB chief executive Brian Berry added 80 per cent of SMEs expect the situation to worsen over the next six months.

“Although our latest snapshot is the fourth successive quarter showing positive results for workloads, employment and enquiries, this could be undermined by a spike in prices and costs,” said Berry.

He explained material prices are approximately 10 per cent higher, and small construction companies have said timber products such as sheet materials and timber fencing are “particularly expensive”.

“The increase in the price of timber fencing is largely due to the severe storms that battered the UK during the winter,” said Berry.

He noted that members had raised concerns over the supply of bricks as small house builders said brick manufacturers are prioritising orders from large construction firms.

“[This] could scupper the ability of SME house builders to plug the shortfall in housing supply – this at a time when we need to rapidly increase the number of new homes. Small house builders report that brick manufacturers are asking them to wait until the beginning of 2015 for new orders of bricks. If this problem continues, SME house builders may be forced to build with alternative materials such as render or risk stalling sites for the rest of this year.”

The FMB’s latest State of the Trade Survey found the net balance for expected output prices increased by nine percentage points to +48, the highest reading since the second quarter in 2008. “Half of firms expect a rise in output prices over the next six months, up from 43 per cent in the previous quarter,” the study added.

For expected wages and salaries the net balance saw a rise of eight percentage points to +45, also the highest reading since the second quarter in 2008. “Just under half of firms (47 per cent) estimate increasing wages and salaries over the next six months, up from 39 per cent three months ago,” the survey noted.

The net balance for expected material costs declined by two percentage points to +79. The report added that 79 per cent of firms expect material costs to rise over the coming six months.

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