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Return of confidence more significant than growth

The return of optimism in the construction industry is more important than the return of growth itself, according to representatives of small, medium-sized and specialist contractors.

The latest figures for economic activity showed construction grew 0.9 per cent in Q2 2013 compared with Q1 2013. It is the second quarterly upturn in the sector since Q2 2011.

General growth in the UK economy stood at just 0.6 per cent above the previous quarter.

National Federation of Builders chief executive Julia Evans welcomed the growth figures, but warned that sustained recovery would require additional work.

“If government wishes to secure this tentative growth, it must do more to harness the potential of SME firms”

Brian Berry, FMB

She said: “A sustained recovery needs a continuing, sustainable level of investment. The growth figures are very welcome but we must not take our eye off the ball.

“There are still some areas, such as the Green Deal for refurbishment and restarting approved but stalled projects, which could work wonders for stimulating the economy across all regions.

“The building blocks for a healthy, long-term industry are being put in place. In the meantime, the industry needs to do more to shout about its achievements”.

Slow recovery

Federation of Master Builders chief executive Brian Berry said the announcement was “positive news”.

“It shows that our industry is finally beginning to recover, albeit very slowly,” he said.

“However, if government wishes to secure this tentative growth in the construction sector, it must do more to harness the potential of SME firms.

“This could be achieved by maximising the economic benefits of Help to Buy by increasing the availability of small sites and reducing the regulatory burden which often discourages smaller developers from bringing new homes to market.

“Central and local government must also do more to open up public sector procurement to small construction firms which are, in many cases, being overlooked in favour of major contractors.”

Margins still tight

National Federation of Roofing Contractors chief executive Ray Horwood said the growth was encouraging.

“There are more orders out there as well as a growing feeling of optimism,” he said.

“However, margins are still wafer thin and prompt payment remains an overriding issue as highlighted in the recently published Construction 2025 industrial strategy.”

“There are longer-term risks such as a generation of potential entrepreneurs not having the financial capacity to invest”

Richard Coleman, Experian

Experian director of SME Richard Coleman said the the figures were “welcome news”, but that the industry must not get complacent.

He said: “The challenges facing UK small businesses go beyond just quarter-by-quarter GDP growth and lending figures,” he said.

“There are longer-term risks that must be further explored such as a generation of potential entrepreneurs not having the financial capacity to invest due to factors like increased personal debt and a lack of equity.

“The danger is that without new, younger business owners having the capital to take over the reins and inject fresh ideas into the greater small business landscape, the necessary, natural regeneration of the SME sector may be delayed in years to come.

“At a time when the SME sector is becoming increasingly competitive through globalisation and new technologies, this may present a significant long-term risk and ‘growth penalty’ on the UK economy.

“Getting this balance right is the only way will we achieve longer term stability and a highly competitive and resilient SME sector.”

An academic study last month showed that trade credit is the main source of financing for many subcontractors, forming 32 per cent of total assets.

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