Financial struggles projected by almost half of construction firms, warns FMB

Forty-four percent of Master Builder companies have reported in the first three months of 2024 that their business is on track to make a loss or fall below expected margins, with an increase in material costs over the past quarter seeing 65% of members reporting that they have needed to increase prices, according to the latest State of Trade Survey from the Federation of Master Builders (FMB), for Q1 2024.

Brian Berry, Chief Executive of the FMB said: “Last year was challenging for small builders across the UK, and while Q1 of 2024 has shown stabilisation, it is clear the situation remains concerning.

“The data being seen for workloads and enquiries are settling in negative figures, similar to those seen between 2010 and 2013, when the UK economy was particularly impacted by austerity measures and limited spending power. There are clearly deep-rooted problems within the UK economy that need addressing.

“There have also been positive signs to take from these figures. We have seen improvements in the availability of skilled workers, with bricklayers and carpenters becoming easier to hire, and overall workloads are up by 6% on the previous quarter. However, with almost half of members reporting a decrease in enquiries, more than two thirds report escalating material costs, and 44% of Master Builder companies say their business is on track to fall below expected margins this year; it is adding up to a deeply alarming picture.

“The next General Election is expected in the coming months. Tackling the housing crisis is going to be one of the major issues which decides the outcome. Last month the FMB launched manifesto, ‘Growth from the ground up' setting out a positive plan for housing and planning; energy efficient retrofitting of existing homes; and the need for long term skills and training to turbocharge economic growth. The next government must take this opportunity to deliver long-term sustainable change.”

The FMB State of Trade Survey for Q1 2024 found:

Market conditions

• There has been a very moderate increase in total workload and enquires, but number are still negative, reflecting the same metrics seen in 2010 to 2013 when the country was buffeted by austerity measures.
• Employment over Q1 of 2024 has remained stable and matches similar figures seen in 2010 to 2013.
• 44% of FMB members reported a decrease in enquiries.
• Workloads were up 6% on Q4 2023.

Skills

• Overall, difficulty in recruitment has slightly decreased, with the exception of general labourers who are more difficult to hire (28% struggled to hire them compared to 24% last quarter).
• 33% of members are struggling to hire carpenters.
• 28% are struggling to hire bricklayers, which has dropped considerably from 35% last quarter.
• Over a third of members report that jobs are delayed because they are struggling to hire skilled workers.

Changes in prices and costs

• 69% of members report that material costs increased in Q1 2024, up from 63% in Q4 2023.
• The impact of increased outgoings has led to 65% of members increasing the prices they charge, with 44% reporting that the business in on track to make a loss or fall below expected margins.
• Over a quarter report that they are restricting hiring new staff as a consequence of increased outgoings.