- 6 in 10 (58%) construction SMEs say they are optimistic that orders will increase in 2025
- Yet just as many (59%) report that banks are less willing to lend to small businesses like theirs compared to the previous 6 months
- The sector remains constrained by the high cost of materials and supply chain pressure
UK Construction SMEs are ambitious to grow, but are held back by the impact of inflation, supply chain challenges and reduced access to capital. That’s according to Bibby Financial Services’ (BFS) SME Confidence Tracker, based on a survey of 1,000 UK SME owners and decision makers, including over 200 in the construction industry.
The survey found:
Construction SME leaders are confident in their prospects
- 58 per cent of construction SMEs say they are optimistic that orders will increase in 2025.
- While the uncertain economic environment is causing many businesses across sectors to press pause on investment, construction SMEs are most inclined to spend. Only 38 per cent of construction companies are waiting to invest until after the General Election, a figure much lower than the average of 46 per cent across all other sectors.
Inflation and supply chain pressures have hit construction hard
- Inflation has had a severe impact on construction firms – 56 per cent of construction SMEs identified it as a key challenge they face, compared to an average of only 48 per cent of SMEs across other sectors surveyed.
- The high cost of materials was identified as a key challenge by 65 per cent of construction SMEs.
- Supply chain disruption has been particularly painful for construction SME owners, as 4 in 10 (42%) cite it as a top factor impacting their business; this number nearly halves among other sectors (27%).
- One third (34%) of construction SMEs have suffered bad debt in the last year.
A challenging financing environment adds to the load
- Despite confidence among business owners and leaders, access to external finance remains a hurdle, as 53 per cent of construction SMEs said it’s more difficult to access external finance than it was six months prior to February 2024.
- A further 43 per cent said their need for external finance increased over the same period.
- 6 in 10 (59%) leaders at construction SMEs reported that banks are less willing to lend to small businesses compared to the previous 6 months.
“In many respects, the construction sector is the bellwether for the economy, and it’s clear that many of the sector’s SMEs owners are seeing an increase in work volumes, which will undoubtedly act as a positive multiplier effect for adjacent sectors, such as manufacturing and transport.
“Despite this optimism, the high cost of materials and shipping, and pressure on supply chains triggered by geopolitical factors in Europe and the Middle East continue to hamper the growth of many construction firms as many businesses price-in this risk, exacerbating the issue throughout supply chains.
“Add to this the increased susceptibility to bad debt and the ongoing challenges faced by construction firms in accessing the finance they need to fulfil existing orders and take on new work, the remainder of 2024 could be a pivotal time for the sector, and the wider economy. It’s vital that whichever political party takes power after the General Election keeps the interests of the sector front and centre of their policies.”
Derek Ryan, UK Managing Director of Bibby Financial Services
