The construction industry is on a knife-edge, says the Federation of Master Builders, as a third of all small to medium-sized building firms fear they will have to reduce staffing levels this year.
The pessimistic outlook for the building industry comes from the FMB’s latest State of Trade Survey. With employment continuing to fall in the last three months of 2012, coupled with the rising cost of overheads such as wages and materials, building firms believe the outlook for 2013 is bleak.
The survey shows that builders’ workloads decreased last year, and are expected to keep falling at least for the first half of 2013. However, the rate at which workloads and employment in the housing sector fell did slow in the fourth quarter of last year, with many specialist trades reporting the first rise in employment since early 2011. In the non-residential sector there were no such signs of encouragement. Many firms said they may have to introduce price rises as overheads continue to eat into profit margins and the likelihood of lay-offs loomed.
“These figures reinforce what we already knew - that 2012 was a very tough year for construction and the outlook for 2013 is still bleak. The government must act now to support building firms and prevent workers from losing their jobs over the next 12 months,” said Brian Berry, FMB chief executive.
“The government’s support for infrastructure spending is good but it needs to look at ways it can boost the building industry, not least the urgent need to build more new homes by freeing up land, easing planning red tape and by pushing investment through its new Business Bank. A VAT cut on building work to make homes more energy-efficient would also help provide an immediate boost for small builders and have the multiple benefits of boosting the economy, helping householders save money on their fuel bills and reducing carbon emissions.”
Key points the FMB’s State of Trade Survey showed:
Workloads continued to decrease in all sectors: The pace of contraction slowed down in the housing sectors, but the opposite was true for non-residential parts of the industry.
The composite indicator continues its downward trend across all regions and devolved nations: Across the board all 12 regions and devolved nations experienced negative indicators; with just three (Wales, Northern Ireland and London) seeing their rate of decline slowing down. The downward trend was particularly pronounced in Scotland, the North of England, the East Midlands and the South West.
Output prices, wages and salaries and material costs are all expected to go up in the coming six months: Although in the case of output prices and wages and salaries the vast majority of firms stated no change at 60% and 77% respectively.
SME employment continued to decline in Q4: The overall expected employment levels are predicted to fall at a slower rate over the next six months and specialist builders reported a positive balance for first time since the first quarter of 2011.
Berry concluded: “The construction industry is on a knife-edge as the Construction Skills Network predicts the slump will last at least a decade. Our members are perhaps more adaptable and resilient than some larger construction companies that rely heavily on major house-building or big infrastructure projects, but if the government does not act swiftly and decisively to support SME builders – the backbone of the British construction industry – then we will undoubtedly see more firms going to the wall and job losses across the board in 2013.”