“Bleak picture of the current market” for SME builders, says the FMB’s State of Trade Survey
The Federation of Master Builders (FMB) has published the results of its quarterly survey into market conditions for small to medium sized building firms in the UK.
The FMB’s survey, covering the third quarter of 2022, highlighted challenges for SME firms in the construction industry, stating that “economic pressures [are] beginning to bite for small, local building companies”. In this article, we pick out some of the headlines from the latest State of Trade Survey Q3 2022 and discuss what can be done to protect your building firm in a challenging economic climate.
Enquiries about building work declined in the third quarter of 2022
Enquiry numbers falling
Continuing a trend which can be traced back to the start of 2022, the State of the Trade survey found that enquiry numbers among the FMB’s membership decreased in Q3. Some sectors reported a larger decrease in enquiries than others, with the repair, maintenance and improvement sector experiencing the smallest drop off during this quarter. The picture varies by region, with the Midlands, South and Greater London regions reporting the most significant decrease in enquiries.
Shortages in labour and materials
The FMB survey highlighted that a scarcity of skilled labour affected construction projects during Q3. Of all the members surveyed, 62% noted that labour shortages had negatively impacted their projects, with 60% reporting that projects had been delayed due to a lack of tradespeople. Bricklayers, carpenters/joiners and general labourers were the most sought-after trades during this period.
Builders reported less issues with material shortages during Q3 than compared with Q2. Where shortages were noted, it concerned resources which require large amounts of energy to manufacture and those requiring semi-conductors.
Material and labour prices continued to rise in Q3 of 2022
Rising prices
Perhaps unsurprisingly, builders reported ongoing price increases. 9 out of 10 building firms noted a rise in material costs in Q3. This represents a slight improvement on Q2, when 98% of builders reported an increase in material costs.
Labour costs also rose during Q3. Just over two thirds of builders reported a rise in their wage and salary bill during this period. Inflation on materials and labour inevitably had an impact on builder’s rates. Over three quarters of the firms surveyed reported increasing their prices during Q3 of 2022.
Looking ahead to Q4 and beyond
Builders who completed the survey predict further price increases in Q4. 88% of firms stated that they forecast a rise in material prices and 54% predict a rise in labour costs.
The FMB gave this warning to UK building firms: “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.”
In October, BBC News reported the collapse of an established building firm, Jehu Group. A Wales-based construction company, Jehu Group had contracts worth £100 million, before it ceased trading. Its directors said cashflow issues, caused by the pandemic and compounded by subsequent cost increases, were the cause of the collapse. It seems likely that more building firms will go under as the economic pressures increase.
Shielding your building firm from the economic climate
To weather the economic storm, building firm owners need to ensure that their business model is robust. With a reducing number of enquiries, the market will become more competitive - but quality, dependable builders will prosper. To be sustainable in the longer term, you must:
a) differentiate your business from your competitors, to win the better jobs in a shrinking market
b) estimate the cost of the work accurately, taking inflation into account, so that the client pays the full cost of the project and you don’t end up covering the shortfall
c) schedule and manage your projects effectively, so that there are no delays - and costs incurred - due to material and labour shortages
A professional-looking quotation can win you the work
Builders who use estimating software, such as EstimatorXpress, Take-off & Estimate Kit and BuildingWorks have an advantage on all three fronts. These products, developed specifically for the small to medium sized builder, produce an accurate, smart-looking quote which will gain the confidence of the customer.
Estimating software helps its users by protecting their profits. As the software estimates everything, and adds inflation to your quotes, it enables you to quote accurate, realistic job-start date prices.
Moreover, estimating software helps you make money through careful management of the project. EstimatorXpress, Take-off & Estimate Kit and BuildingWorks all create a build programme to help you book your subcontractors in good time. They automatically produce material order schedules. Simply email the schedule to your builder’s merchant and call off the materials, when needed. No more delays due to material shortages!
No one can predict what the next year will hold. One thing we can say for certain is that builders using estimating software will be winning more contracts and taking control of their projects. Prepare yourself for 2023 by starting a free trial of the software now: