Scottish builders bounce back but material price concerns remain

Scottish construction firms enjoyed strong growth in the first three months of this year despite record numbers of builders reporting rising material prices, according to a new report.

The latest results from the quarterly State of Trade Survey by the Federation of Master Builders (FMB) revealed that the overall indicator for the performance of Scottish construction SMEs, rose 19 percentage points in Q1 2018 compared with the previous quarter in terms of workloads, expected workloads and enquiries to reach +7%.

The survey, which is the only quarterly assessment of the UK-wide SME construction sector, also revealed that more construction SMEs predict rising workloads in the coming three months, up from 38% in the previous quarter to 49% in Q1 2018.

Gordon Nelson

Gordon Nelson, director of FMB Scotland, said: “After a significant dip in the last quarter of 2017, it is pleasing to see confidence and workloads for small builders in Scotland bouncing back. The positive results demonstrate the resilience of small construction firms in Scotland, especially given that many firms lost more than a week to the ‘Beast from the East’ back in March.

“Whatever the weather, currently there is clear demand for building work from home owners and other clients. These positive results are all the more welcomed given that the sector is up against considerable headwinds being created by rising material costs and the scarcity of skilled tradespeople.”

Concerns were aired regarding materials prices and labour shortages with 90% of builders reporting increasing material prices, the highest reading on record.

More than half (58%) of construction SMEs are struggling to hire bricklayers and 55% are struggling to hire carpenters and joiners while two-thirds (66%) expect salaries and wages to increase during the next six months, up from 62% in the previous quarter.

Mr Nelson said construction bosses will be taking nothing for granted as there are stormy waters ahead for Scottish construction SMEs.

He added: “The introduction of new income tax rates and bands, which came into effect in Scotland in April, means that almost half of the population will be paying more income tax now than their counterparts south of the border. The prospects of many construction SMEs are determined by levels of consumer confidence and spending power.

“We will wait with baited breath as many Scottish home owners adjust to how the new tax rates impact on their household budgets. The tax rates may well impact how willing home owners are to commission projects such as a new kitchen, bathroom or extension – the life blood of the SME builder. This may stifle the growth experienced in the past three months.”

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