The Federation of Master Builders (FMB) latest State of Trade Survey reveals expected workloads and enquiries for SMEs dropped by 19 percentage points between October and December 2017 compared with the previous quarter.
In addition, fewer SMEs are forecasting rising workloads in the coming three months; down from 41% in the previous quarter to 38% in Q4 2017, while 87% of builders believe that material prices will rise in the next six months (up from 82% in Q3 2017).
Nearly two-thirds of construction SMEs also expect salaries and wages to increase in the next six months.
Gordon Nelson, Director of FMB Scotland, said there a several contributing factors for the decline, such as the ongoing industry skills shortage
-- Advertisement --
"Scottish construction firms experienced a significant dip in the final quarter of 2017," he said.
"Prior to these latest results, we had seen seven consecutive quarters of growth for small builders in Scotland. There are several contributing factors, not least the skills shortages which continue to hamper many SMEs, with rising shortages of key trades like carpenters, plumbers and plasterers.
"As a result, the wages for these increasingly scarce skilled trades continue to rise sharply. What's more, material prices are also rising and almost 90% of builders think this trend will continue over the next six months.
"This means Scottish construction SMEs continue to see their margins squeezed, with many choosing to absorb costs rather than pass them onto their clients."
Mr Nelson continued by saying investment in housing and infrastructure "can help to support the industry and boost the wider economy".
"As such, the Scottish Government has recently announced a £150 million injection into the Building Scotland Fund," he said.
"This could be used to provide a much needed stimulus for some SME construction firms although we still await details regarding exactly how it will work. The construction industry is the cornerstone of the Scottish economy so it's in all of our interests to do what we can to support the smaller companies which form the bedrock of the sector."
(LM/MH)
