BUILDERS STILL BUOYANT DESPITE INFLATION & COST OF LIVING FEARS
Posted by: electime 7th March 2023
- Small & medium sized builders ‘protected’ from harsher economic realities
- Almost one fifth have ‘too much’ or ‘more than usual’ work in the pipeline
- 70 per cent say demand had remained stable or increased.
Local builders also affected by labour shortage experienced across the whole of the UK
Builders reveal a very limited impact of consumer price inflation and rising cost of living on their current and future workload according to a survey by largest group of independent builders merchants in Southern England.
The extensive survey by the Independent Builders Merchant Group, IBMG, of small to medium sized builders and trades reveals continued high demand for their trade and point to a robust sector ready to weather recent economic turmoil.
Work Pipeline/Demand
Despite the ‘cost of living’ squeeze on domestic spending, small and medium sized builders are not feeling the impact – yet at least.
Almost 80 per cent, mostly local building businesses, reported a ‘healthy pipeline of work’ despite well documented pressures on household budgets. 60 percent said they had ‘a manageable amount of work’ in the coming 6 months while a further 17 per cent said that they had ‘too much or more than usual’ in their six-month pipeline.
Change in type of products/jobs
When drilling down into the type, value and size of projects, a similarly positive picture seems to emerge. The vast majority (87 per cent) of small and medium sized builders said the building projects they are working are the same size or bigger than previous years. Two thirds of all respondents said the size of jobs or projects they were working on or planned to work on are the same size as this time last year, and 22 percent (just over a fifth) of all builders reporting that projects are bigger than in 2022. Only 12 per cent revealed that building jobs they were taking are smaller than 12 months ago.
Demand for work
When asked had the level of demand for their work changed in comparison to other years, a whopping 70 per cent said demand had either stayed stable or increased. This breaks down to 18 per cent said demand had ‘increased a lot’ with a further 20 per cent say it had ‘increased a little’. One third of respondents said they had ‘not noticed any change in demand’ for their work. A quarter of respondents report a marginal decrease in demand, with only 3 per cent saying demand had plummeted.
Martin Stables, CEO of IBMG said: “Bombarded with negative stories about the economy one would have expected that home owners to be wary about progressing new projects, however, it appears from this research that the majority of local builders are faring well, with demand remaining stable or increasing.”
The type of work that small and medium sized builders are working on also seems to have stayed the same with the vast majority – 72 per cent – reporting that, compared to this time last year, the type of building projects they work on hasn’t changed at all, with quarter revealing that the type of work has changed only marginally while only 4 per cent saying it changed a lot.
The type of work respondents are mainly involved in is varied with most respondents classifying themselves as general builders and working on a good mix of projects. The type of building work they are involved in, in order of importance are: refurbishment & maintenance, followed by extensions, then loft and garage conversions, with new builds and internal reconfigurations coming in at fourth place.
A third of respondents specially mentioned garage and loft conversions hinting at a trend to expanding living areas rather than move. Surprisingly, when asked specifically about building work to improve energy efficiency, only 11 per cent said they worked on delivering energy efficiency projects at the moment. However more than a third ( 35 per cent) reported an increase in enquiries for this type of work – such as demand for insulation work such as attic insulation, window replacement and enquires about renewable energy sources.
Stables said: “While mortgage approval rates have an almost direct effect on the domestic project work as the more movement within the housing market general filters into increased number of renovation projects. However, what we can take from these results is that people might be investing in their existing property rather than moving. Unsurprisingly, a third of our customers are reporting increased enquiries on energy efficient installations. Either way it appears that local builders are kept busy and fully employed.”
Building materials & supplies
While most builders accept that inflation has impacted the cost of supplies, less than fifth of builders see this slowing down their workload in the coming 6 months. Indeed almost three quarters of builders said they had ‘enough’ or ‘too much work’ in their pipeline for this period.
Considering the current economic situation, the vast majority said they see their customers continuing to commit to building projects and the demand for their work continuing. While two thirds said that the cost of materials was impacting their work, 68 per cent also agreed that they were good at adapting to changing market conditions and finding solutions for their customers projects.
Stables said: “Due the size of IBMG, owning 173 merchant branches, we have been able to leverage some of our buying power with manufacturers. Where we can we like to pass these savings on to builder customers – in particular for timber, aggregates and bricks that tend to be staples of most building work.
“For larger developers and investors, the picture might be different – with materially higher interest rates for the medium term they might be looking to press pause until the economic realities of inflation have become clearer. However, for the grass roots backbone of the construction industry: construction SMEs and the local general builder the future looks secure. The small and medium sized builders’ ability to pivot and adapt building plans a pace is a key strength to their success.”
Challenges
When asked about the core challenges they anticipate over the coming 12 to 18 months, in poll position for 8 out 10 respondents is ‘the increased cost of labour’, closely followed with 7 out of 10 builders saying that ‘scarcity of labour or difficulty in finding an ‘extra pair of hands’’ was challenging or very challenging. As one respondent said: “We’re always looking for more brickies and plasterers. It’s a constant battle.”
The third most challenging issue for respondents was ‘converting the volume of enquiries into actual work’ however, the vast majority have no problem with cash flow with in excess of 60 per cent of respondents saying they get timely payments from their customers.
Stable said: “While rising interest rates could dampen ambitions of the large construction and building contractors, this survey suggests that local builders working on local projects appear to be insulated from the current economic crisis. Demand remains fairly constant and it appears that they have their cash flow situation in order too with the vast majority reporting timely payments.
“Contrary to many media reports and fears among workers about whether they would be unable to weather the storm this IBMG survey reveals cautious optimism among the small and medium sized builder throughout the UK. “
“That said, it is the labour shortage experienced across the whole of the UK that is also affecting local builders. Recent reports suggest that more than a quarter of a million extra construction workers will be needed by 2026 to meet growing demands on the UK sector.
Now and future 12 months
Overall respondents seem happy with their earnings. When asked to describe their earnings, almost 20 per cent said things were ‘doing well’, more than half said they ‘were comfortable’ and 2 per cent said it was ‘boom time’.
When asked about the coming 12 to 18 months and how they think their business will fare, more than half of all respondents said they would be ‘fine’ and expected demand to continue at ‘about the same level as previous years’, a further 10 per cent they expected to do ‘better’ than previous years, while a more cautious 22 per cent said it was ‘hard to predict’ . Only 14 per cent reported a more pessimistic outlook.
The Independent Builders Merchants Group (IBMG) owns more than 20 leading builders merchants brands through the South of England to include Parker Building Supplies, Chandlers Building Supplies, Fairalls, RGB and Grant & Stone among others. In 2022 IBMG continued its growth with several acquisitions to include: Merkko, Cornish Fixings and Wantage Builders Merchants. Established just four years ago, it now owns 173 merchant branches spanning five divisions; general builders merchants, plumbing, heating & bathrooms, electrical wholesale, roofing & timber.
It has also just launched a new website https://www.independentbm.com/
