In a market dominated by major players, smaller builders face constant challenges – and according to the latest research by the Federation of Master Builders (FMB) times have been getting even tougher lately.
The research quotes a third of small building firms as saying that rising material prices are squeezing their margins. What’s more, almost a quarter have had to risk losing goodwill and possibly even business by passing these price increases onto consumers.
What’s hitting SME house builders the hardest?
After the referendum outcome last year the value of sterling depreciated, increasing the cost of imports. SME builders were asked which materials have increased the most in price, and the results were as follows:
- Plasterboard / slate (joint sixth)
- Boilers and radiators
- Porcelain products
What impact are these price rises having?
Survey respondents were asked their opinions on the consequences of these increases. As many as 17 out of 20 (85%) thought they might lead to consumers hiring cowboy builders in an attempt to save money on their building projects. Around a third had experienced squeezed margins, while nearly a quarter (22%) said they’d been forced to increase their own prices. Sadly, more than 10% went further still and said they’d made losses on building projects as a result, rather than attempting to re-negotiate their original quotes with their customers.
Brian Berry, Chief Executive of the FMB, commented on the findings. He said what was making things worse for SME builders was that wages and salaries have been rising as a result of long-term shortages in construction skills.
And as Brexit negotiations continue, as the employment and availability of EU nationals hangs in the balance, and as future exchange rates remain unpredictable, we might also wonder how much more challenging both materials costs and the wages squeeze might get.
For more information on this topic see our article ‘Barriers facing SME builders.’
By LABC Warranty
Please Note: Every care was taken to ensure the information in this article was correct at the time of publication. Any written guidance provided does not replace the reader’s professional judgement and any construction project should comply with the relevant Building Regulations or applicable technical standards. However, for the most up to date LABC Warranty technical guidance please refer to your Risk Management Surveyor and the latest version of the LABC Warranty technical manual.