Small builders hit hard by recession

Over half of small building firms saw workloads decline in the private housing sector in the first three months of 2009, according to the latest State of Trade Survey published by the Federation of Master Builders.

The industrial and commercial sectors fared even worse: 73% reported a decline in workloads in the industrial sector, and 66% for the commercial sector.

However, the rate of deterioration in the private housing sector slowed slightly in the three months to March as more than 30% of firms indicated that workloads remained unchanged from three months previously. 65% of respondents reporting lower workloads in social housing. Increases in government funding for social housing are taking time to filter through, as delivery methods need to be looked at in light of the reduction in section 106 agreements.

Workloads in the private housing RM&I sector continued to decline in Q1 2009, as consumers remained reluctant to spend on “big ticket” improvements in light of the ongoing economic uncertainty. However, over 13% of respondents reported higher workloads, whilst almost 56% indicated a decline.

The social housing RM&I sector was the strongest of the four housing sectors. Around 44% of firms saw no change in workloads in the sector, whilst 48% experienced a fall.

More alarming is the finding that builders’ expectations for the future remain downbeat with 57% of FMB builders expecting lower overall workloads in the next three months. This figure though is a slight improvement on the 61% who were expecting lower workloads during the last three months of 2008.

The survey indicates that there may be a slowing in the rate of decline in private housing, public non-residential new build, and public non-residential repair and maintenance. The brightest news is in the public non-residential new build sector which saw the strongest improvement, with 14% of FMB builders reporting that their workloads had increased in this sector.

Richard Diment, Director-General of the FMB, says: “Given the weak economic outlook, the negative workload responses from FMB builders are hardly surprising as this general gloom surrounding the UK’s future economic prospects convinces many companies to put expansions, moves, and new office building on hold for the foreseeable future.

“Our latest State of Trade Survey demonstrates clearly just how badly small building firms are being hit and how their suffering translates directly into falls in other sectors of the economy. There is no doubt that the drastic fall in industrial and commercial construction activity is due to the very real fears that businesses have about their prospects for the future.”

He continues: “This is further evidence, if any were needed, of how wrong the Government’s decision to proceed with the above inflation increases in business rates and the suspension of business rate relief on empty properties are. Clearly the last thing business needs in these conditions are further tax rises.”