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SMEs negative about the year ahead

Small and medium-sized firms are set to endure a fourth year of falling workloads, while more than a third of companies expect to cut their staffing levels this year, according to the latest State of Trade Survey from the Federation of Master Builders.

The survey paints a bleak picture for the year ahead, as almost 47 per cent of firms expect workloads to contract at the beginning of 2011.

Workloads continued to decline in all sectors for SMEs in the final quarter of 2010, creating a negative net balance for the 12th successive quarter, where a net balance of zero would indicate an equal amount of positive and negative answers.

The SME sector has now seen three years of declining workloads.

A poll of Construction News readers published earlier this year found small firms with turnovers below £26 million were more optimistic than larger firms, saying their ability to adjust quickly to market conditions would stand them in good stead.

However, FMB director-general Richard Diment said the increase in the rate of VAT earlier this month would cost the construction sector nearly 7,500 jobs this year, with the rise expected to hit SMEs particularly hard.

“The construction sector has still not reached the bottom of the most savage recession for the industry in living memory,” said Mr Diment. “Cuts in government expenditure are making matters worse with more than half of building companies reporting falling levels of work in public repair and maintenance work.”

“The government is pinning its hopes of economic recovery on the creation of new jobs in the private sector, but its policies are having exactly the opposite effect in the building sector.”

He said cuts in public sector spending on repairs and maintenance of social housing were having a “particularly adverse impact”, with nearly half of building companies reporting that work in this sector has fallen.

The net balance for social housing repair, maintenance and improvement was the most negative as around 48 per cent of firms indicated that workloads in the sector had declined during the quarter.

New social housing was the only sector to see an improvement in its net balance in the fourth quarter of 2010. It rose by two points, reflecting positive sentiment from 13 per cent of respondents.

The outlook for employment for the first six months of the year remains downbeat, as 31 per cent of firms expect to reduce staffing levels.

Both specialist and general builders reported declining employment levels during the final three months of 2010 and both are expected to decline further in 2011, although an anticipated need for specialists means employment levels for skilled workers may hold firm.

Firms reported difficulties recruiting supervisors, site managers, carpenters/joiners and plumbers & HVAC trades.

“The construction sector has the potential to build Britain out of recession and we know that every £1 spent on construction output generates a total of £2.84 in total economic activity,” said Mr Diment.

“If this could be coupled with expenditure on infrastructure projects as well as tackling the growing housing crisis, the government would be building the real foundations for a sustained economic recovery.”

 

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