Workloads for small and medium firms (SMEs) in Scottish construction rose faster in the first quarter of 2017 than at any time since the 2007 financial crisis, said the Federation of Master Builders (FMB) Scotland.
However, the sector is also dealing with sharp rises in imported materials amid the depreciation of sterling and the rising cost of skilled labour which has been exacerbated by a worsening skills shortage.
Results from the FMB’s State of Trade Survey for Q1 2017, the largest quarterly assessment of the UK-wide SME construction sector, included:
- Scottish construction SME workloads rose faster than at any time since Q4 2007
- One in two construction SMEs predict rising workloads in the coming months, with just 5% predicting a decrease in activity
- However, 85% of builders believe that material prices will rise in the next three months
- 58% of firms are struggling to hire carpenters, the highest reported level since the financial crisis
Gordon Nelson, director of FMB Scotland, said: “Scottish construction SME workloads have now risen for five consecutive quarters and rather than tapering off in advance of Article 50 being served, that growth seems to have accelerated in the first quarter of this year.
“At a time of growing concern about the strength of the Scottish economy, the robustness of the construction SME sector is a definite good news story.
“Even more encouragingly, the number of enquiries for future work has risen solidly and one in two firms are now predicting that their workloads will continue to rise in the coming months.”
However, Nelson said builders had experienced sharp rises in material prices since the depreciation of sterling in June last year and the subsequent spike in the cost of imported materials and products.
Added to this was the rising cost of skilled labour which has been exacerbated by a worsening skills shortage.
Builders expect further increases in output prices in the next quarter and will have to pass on these costs to the consumer.
Nelson added: “The biggest concern for builders, however, will be the prospect of weakening consumer confidence.
“The risk of economic uncertainty impacting on consumer spending was already present due to confirmation of the UK’s departure from the EU and the possibility of another Scottish independence referendum in the medium term.
“Now that home owners will also be factoring in the UK General Election, Scottish builders may well temper their optimism.
“The repair, maintenance and improvement sector is the staple of most small local builders and is notoriously vulnerable to dips in consumer sentiment.
“Going forward, the industry is hoping that political stability will be re-established as soon as possible as both consumers and businesses respond best to political certainty.”