Construction giants fall, but SMEs report the biggest surge in growth optimism in five years

Here’s why

A harsh winter for the UK’s construction sector has ended with the collapse of the largest supplier to the public sector. Lost work days due to the ‘Beast from the East’, housebuilding down by 14 per cent and record numbers of builders reported material price increases too. Despite all this, growth optimism among the sector’s SMEs is the highest in five years, according to AXA, one of the UK’s biggest construction insurers.

Fifty-six per cent of SME building firms predict rising workloads in the next six months, double the number in the same period 2016 and up 12 percentage points on Q4 of last year. Numbers who cite ‘lack of work’ as their biggest business risk have fallen too: down from a quarter of firms this time last year to 16 per cent. 

The collapse of the construction giant Carillion has not carried through to construction’s SME bedrock. The growing order books of these building firms – 84 per cent of whom rely entirely on work from private householders and local businesses – is another early indication that UK consumer confidence is recovering.

Anticipated growth will be firmly in the small residential category, as few SMEs are looking at the housebuilding and public sector as realistic prospects. While two thirds of SME building firms said they have the appetite to diversify into these bigger projects, just 10 per cent said they will attempt to do so.

The top reason for such pessimism was that both arenas are considered ‘closed shop’, with contracts and permissions going to an elite circle of bigger companies. Difficulties accessing finance and skilled workers were cited in second and third place only.

Gareth Howell, Managing Director, AXA Insurance UK plc, lent his support to industry calls for an SME ‘Help to Build’ scheme:

“The UK is 100,000 houses per year down on its target for new affordable homes. The biggest public-sector contractor has just crashed, leaving this field open to newcomers. There have been suggestions that small firms will ride to the rescue on both fronts, but they have been out in the cold for way too long. In the case of housebuilding, 30 years or more. Small firms have learnt to live without such projects, but can our infrastructure live without them?”