FMB reveals Welsh construction growth is slowing

Growth among Welsh construction SMEs slowed in the final quarter of 2018, according to the Federation of Master Builders (FMB) Cymru.

Key results from the FMB’s latest State of Trade Survey, which is the only quarterly assessment of the UK-wide SME construction sector, include:

  • Welsh construction SME workloads remained positive in Q4 2018 but grew at a slower rate than they did in the third quarter of 2018;
  • 42% of builders have detected signs of a weakening housing market;
  • One in five construction SMEs have had projects stalled in the past three months due to delays to loans, or loan refusals, from the banks;
  • Carpenters overtake bricklayers as the trade in shortest supply with nearly two-thirds (64%) of construction SMEs struggling to hire carpenters and joiners and 61% struggling to hire bricklayers;
  • Looking ahead, fewer construction SMEs predict rising workloads over the next six months, with 33% of businesses anticipating higher workloads, down from 36% three months earlier;
  • 87% of builders anticipate that material prices will rise further in the next six months, slightly up from 86% in Q3 2018;
  • Two-thirds (66%) of construction SMEs expect wages and salaries to increase over the next six months, up from 58% in the previous quarter.

Ifan Glyn, Director of FMB Cymru said:

“Growth among the Welsh construction SMEs slowed in the final quarter of 2018. A range of factors are at work here, not least the sharp rise in costs Welsh builders are contending with. Two-thirds of construction SMEs expect wages and salaries to increase over the next six months, up from 58 per cent in the previous quarter. Coupled with this, material prices are rising, with 87 per cent of builders anticipating a further rise to material prices in the next six months, slightly up from the last quarter. Nearly a third of homes being built in Wales are timber framed, and 90 per cent of the timber the UK construction industry uses is imported from the EU. To avoid a significant spike in material costs for many Welsh builders post-Brexit, the UK Government must therefore help by creating barrier-free access to imported goods, not just tariff-free.”

Glyn continued:

“The Welsh construction sector is also extremely concerned about the acute skills crisis. This latest research shows that nearly two-thirds of construction SMEs are struggling to hire carpenters and nearly as many are finding it difficult to hire bricklayers. Although there are low numbers of EU workers operating in the Welsh construction industry, it is important for construction firms across the UK that the post-Brexit immigration system permits free and unfettered access to EU labour. If the sector is restricted in drawing upon EU workers, the impact on London would be significant. London would then act as a magnet attracting tradespeople from Wales who may choose to work across the border after being tempted by the prospect of higher wages. The skills shortage would worsen in Wales, salaries would spike, and margins will further be squeezed.”

Glyn concluded:

“The resilience of Welsh construction SMEs must be commended because growth in the final quarter of 2018 remained in positive territory, despite these significant headwinds. More than 40 per cent of builders have detected signs of a weakening housing market, and this may well have resulted in more Welsh homeowners opting to improve their existing homes rather than move. This type of work is the bread and butter of local builders who rely on people commissioning extensions, loft conversions, kitchens and bathrooms. Anecdotally, firms are also reporting that they are remaining busy. However, things could go sour very quickly if the Westminster Government doesn’t get its house in order. After two-and-a-half years of political back and forth on Brexit we are none the wiser about where we will stand in two months’ time. If costs continue to rise, and the skills shortage worsens, the growth so far enjoyed by Welsh builders won’t last.”