After a challenging end to 2024, the UK construction industry is showing strong signs of recovery in the first half of 2025, according to the new SME State of Trade Survey from the Federation of Master Builders (FMB) and the Chartered Institute of Building (CIOB).
SME builders saw strong growth in workloads, enquiries, and employment, led by house building and maintenance. However acute skills shortages and rising costs continue to disrupt delivery and squeeze profits.
Despite the overall reported recovery compared to Q4 of last year, costs still seem to be rising, primarily driven by materials prices and wages:
- 75% saw increased material costs.
- 67% reported rising wages and salaries.
Worryingly this is having an impact on growth, despite the positive trend so far, with nearly half of all companies reporting making losses, or that costs are hampering profits. A shocking 1 in 4 report their businesses may be on the path to going bust:
- 49% reported lower-than-expected profits or losses.
- 25% feared for business viability.
With increases in costs and squeezed margins it appears that potential employment opportunities are taking a hit, with over a third holding back on new employees and just over 1 in 5 making staff redundant. This all comes at a time when the Government need to find 151,000 more construction employees according to CITB modelling.
Turning a corner
Brian Berry, Chief Executive of the FMB commented: “After a tough end to 2024, it’s welcome to see the construction sector turning a corner in the first half of 2025. However, recruitment remains a major challenge, with carpenters, roofers, and plumbers among the hardest roles to fill Skills shortages are having a real impact on delivery.”
Berry continued: Rising costs are compounding the pressure with bottom lines pressed. Increased costs have led to lower-than-expected profits for nearly half of respondents, and one in four now fear for their business’s viability. While it is a positive sign that more than half of firms are optimistic about the second half of the year, it’s clear that targeted support is needed to sustain this recovery and help SMEs thrive.”
Paul Gandy, CIOB President, said: “SMEs are the backbone of our construction industry – they deliver the homes our communities depend on. With many people these days choosing to improve their existing properties instead of moving home, it’s vital for them and the wider economy they can easily find reliable and competent builders to carry out work which is both affordable and high quality.
“In short, if we want the construction industry to be sustainable, we must make it easier for smaller firms to thrive. That means tackling issues such as late payments, and ensuring SMEs can affordably hire apprentices to grow the skilled workforce our sector desperately needs. With the right support, SMEs can and will continue to play their crucial role in building a stronger, more resilient built environment.”
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