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04 February 2019

Construction growth hits 10-month low as small firms near Spring flashpoint

The Construction Purchasing Managers’ Index has fallen to its lowest point in ten months, hitting 50.6 in January. Employment growth within the sector has dropped to a two-and-a-half year low.

The announcement follows the launch of the latest Impact of Government Policy Index (IGPI), which shows small construction firms shouldering a 28% increase in policy-linked costs since 2011, a greater rise than any other sector.

On average, small VAT-registered firms across the UK have each suffered a 15% – equivalent to £60,000 – increase in costs stemming from government interventions since 2011.  

FSB National Chairman Mike Cherry said: “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.”