“Economic pressures beginning to bite for small, local building companies,” says the FMB’s State of Trade Survey
Every 3 months, the Federation of Master Builders (FMB) conducts a survey of its members to monitor the state of the UK building industry, with a particular focus on SME building firms.
The latest survey was published in October 2022. It warned of tricky market conditions for small to medium sized building firms. Here we share the headlines of the industry’s State of Trade Survey Q3 2022 and what you can do to protect your business during worrying economic times.
Enquiry levels for building firms dropped in Q3 of 2022
Dropping numbers of enquiries
The FMB’s quarterly survey of SME Construction firms found that enquiry numbers decreased overall in Q3 compared with Q2 2022, continuing a trend which began at the start of the year. The decrease in enquiries varied by sector, with the repair, maintenance and improvement sector experiencing the smallest decrease in enquiries in Q3. The decline in enquiries also varied by region, with the greatest drop offs reported in the Midlands, South and greater London regions.
The FMB suggest that the negative enquiry levels give a “bleak picture of the current market”.
Resource shortages
A shortage of skilled labour was highlighted in the report. 62% of builders surveyed reported that projects had been affected by labour shortages, with 60% reporting delays to jobs in Q3. Building firms reported that were finding it most difficult hiring carpenters/joiners, bricklayers and general labourers. The FMB suggested that the lack of skilled tradespeople is an area which the government and industry needs to address.
Material shortages were less of an issue overall during Q3 than during Q2. Most shortages in Q3 related to resources which require a significant amount of energy to manufacture, and those which use semi-conductors.
Material and labour prices increased for many builders during Q3 of 2022
Price rises
Price increases are an ongoing challenge for UK builders. 90% of FMB members reported an increase in material costs in Q3 2022, a slight drop from the figure of 98% in Q2.
Labour costs are also on the increase. 67% of those surveyed reported a rise in wages and salaries during Q3. Rising costs have inevitably resulted in building firms charging more for their work. 76% of building firms surveyed reported increasing their prices in Q3.
The outlook
Looking ahead, the FMB’s membership anticipate further price rises in Q4, with 88% of firms expecting material prices to rise and 54% expecting wage and salary bills to increase.
The FMB warns that, “the impacts of Brexit, Covid, and the war in Ukraine will continue to be felt, making the coming months a challenging time for the new Government.”
It’s a stark warning for UK builders, with even established, successful building firms collapsing in the current economic climate. BBC News reported in October that Jehu Group, a Welsh construction and development company with contracts worth £100 million, had ceased trading. The company directors explained that their business suffered cashflow issues caused by delays during the pandemic which were compounded by subsequent cost increases of 25%.
What you can do to protect your business
To buffer your building firm against the challenging economic climate, it’s essential that your business model is right. As enquiry levels drop and the market becomes more competitive, quality, reliable builders will come out on top. To remain profitable, your building firm must:
a) stand out against the competition to win the better projects in a shrinking market
b) price the work accurately, building inflation into your quote, so that you don’t end up subsidising the work
c) schedule the jobs well ahead of time, so that you have all the materials and tradesmen you need on site, with no delays
Estimating software, such as EstimatorXpress, Take-off & Estimate Kit and BuildingWorks can help on all three fronts. These software products all supply you with a detailed, professional-looking quote which will help win over the prospective client.
Using estimating software will protect your profits by helping you include everything in your estimate. The software will calculate the inflation between the day you estimate the building costs and the day you break ground so that you can quote the homeowner job start-date prices.
What’s more, it’ll help you well beyond the estimating stage. EstimatorXpress, Take-off & Estimate Kit and BuildingWorks all generate a Gantt style build programme to help you book in the trades well in advance. The material order schedules, which are automatically produced by the software, can be sent to your merchant and called off as required, so you can ensure the materials are delivered to site well in advance.
We can’t predict exactly what the next 12 months will hold, but we do know that builders using estimating software will be in the best position to weather the storm. Prepare yourself for the months ahead by getting a free trial of the software today.