Confidence soars among small construction firms despite skills concerns

BFS's SME Confidence Tracker states that construction firms are growing in confidence

  • Half of subcontractors expect work volumes to increase between April and July
  • Finding and keeping skilled labour is a key concern for construction firms
Confidence amongst construction firms is on the rise, with three quarters (74%) of subcontractors set to invest in their business over the months ahead, according to the latest SME Confidence Tracker report from business funder, Bibby Financial Services (BFS).

Data reveals that half (50%) of construction SMEs expect work volumes to increase over the next three months – the highest level since before the EU referendum. Between April and July, construction firms plan to invest an average of £10,000 in areas such as staff training, recruitment and machinery.

Helen Wheeler, Managing Director of Construction Finance at BFS said: “There was a collective confidence wobble amongst construction firms after the referendum last year.

“However, we are now seeing a step-change in attitudes amongst smaller construction businesses, with more firms looking to invest and grow. Work volumes are also rising, which is a positive indicator, particularly in light of wider economic uncertainty surrounding the UK’s separation from the EU.

“It’s encouraging to see construction businesses investing in people and machinery as such activity has a positive multiplier effect on supply chains throughout the entire country.

“Almost three quarters of the construction firms we surveyed plan to invest over the next three months, significantly higher than the national average across all sectors, which was 59 per cent.”

Over half (53%) of the subcontractors surveyed voted to leave the EU and would not change their decision if the vote was today, compared to 28 per cent that voted to remain and would vote the same way again. Findings of the report shows that half (50%) of subcontractors think Brexit will make no difference to their business at all, higher than the average for all sectors (42%).  

But despite strong confidence among smaller construction businesses over work volumes and investment, subcontractors have signalled concerns surrounding skills gaps, finding new customers and managing cashflow.

Almost half (46%) of those surveyed said that finding and keeping quality staff is their biggest concern, while over a third (37%) said that winning new customers is a key challenge. A similar proportion (36%) said that cashflow was the biggest business headache they currently face.

More than a third (34%) of businesses said they have suffered from bad debt in the past year with an average of £20,000 written-off by those affected.

Helen Wheeler said: “It is positive to see subcontractors planning for growth, however, many are signalling deep concerns over skills shortages, new business and cashflow.

“While many businesses seem indifferent over the process of Brexit, the sector has much riding on the Government’s discussions with Brussels relating to the movement of labour as this could have a worsening effect on skills shortages.

“Furthermore, bad debt is ongoing issue within the construction industry. It is a problem that must be tackled as it impacts employment and profitability for smaller firms, representing a significant economic leakage.”

Posted on 10 April 2017

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