Small businesses organisation warns of construction 'flashpoint'

Mike Cherry, Chairman of the Federation of Small Businesses: "It’s a flashpoint that could threaten the futures of many.”

The Construction Purchasing Managers’ Index (PMI) fell to a 10-month low of 50.6 in January, although it is up on the same month last year (when there was a lot of snow and ice). Employment growth in construction is at its slowest rate for two-and-a-half years.

The announcement comes on the heels of an Impact of Government Policy Index (IGPI) showing small construction firms are shouldering a greater rise in costs associated with government policies than any other sector.

On average, small VAT-registered firms across the UK have suffered a 15% increase in costs stemming from government interventions since 2011, but in construction it is 28%, according to the IGPI.

Mike Cherry, the National Chairman of the Federation of Small Businesses, says: “Spiralling employment costs, skills shortages and a weak pound have made it increasingly tough for small construction firms to grow in recent years.

“Today’s PMI brings into sharp relief the impact that political uncertainty is having on one of our most important sectors.

"Small business confidence is at a seven-year low. Two-thirds of firms are not planning to increase investment and, with inward migration from the EU down, more than a third say lack of the right staff is holding them back. A lot of small construction firms rely heavily on mid-skilled employees from Europe.

“To be less than 60 days out from Brexit day and still have no idea what business environment we’ll be operating in on 30 March is completely debilitating. Politicians from all sides of the house must work together to end the impasse.

“Come the beginning of April, small construction firms will not only have Brexit to think about but also Making Tax Digital, rising pressure on wages, higher auto-enrolment contributions and further business rates hikes. It’s a flashpoint that could threaten the futures of many.”