The UK construction industry is showing some really robust signs of recovery when it comes to the first half of 2025; however, the skills and cost pressures still persist, as per new research.
It is well to be noted that according to the latest SME State of Trade Survey that is rolled out by the Federation of Master Builders (FMB) as well as the Chartered Institute of Building (CIOB), the SME builders experienced a very robust growth in terms of workloads, inquiries, and employment across the UK construction industry mostly led by housebuilding along with maintenance. But the skills shortages, along with the increased costs, go on to disrupt the delivery and at the same time also squeeze profits.
Interestingly, the most challenging trades to hire were carpenters at 33%, roofers at 32%, plumbers/HVAC at 28%, general laborers at 29%, and bricklayers at 28%.
In spite of the overall reported recovery as compared to Q4 of 2024, the costs still look to be rising, majorly driven by material prices as well as wages. 75% of the respondents noted growing material costs, and 67% reported the rising wages along with salaries.
Almost 50% of all the companies reported either making losses or that the rising expenditures are indeed hampering the profits. Interestingly, quite shockingly, 1 in 4 go on to report that their businesses may as well be on the path of going bust.
Notably, there were more than a third of respondents who admitted to holding back on certain new employees, with only over 1 in 5 making the staff redundant.
The net workload grew by +25%, hence reversing the decline of –11% that was seen in the last quarter of 2024. This goes on to mark the very first simultaneous growth in terms of workload and inquiries,as well as employment, ever since the second quarter of 2023.
It is worth noting that the net inquiries grew +34% from –23% in the fourth quarter of 2024. The net employment shift experienced was +26%, which is the strongest quarterly improvement since the first quarter of 2010.
On the other hand, in Scotland, the workloads were up 30%, and the inquiries rose to 56%.
The chief executive of the FMB, Brian Berry, said that after a tough end for 2024, it is indeed quite a welcome sight to see the construction sector seeing the surge in the first half of 2025. However, the recruitment aspect still remains quite a massive barrier, with carpenters and roofers as well as plumbers being the hardest roles to fill the skills shortages, and they are, in a way, having a major effect on delivery.
He added that the increase in the costs is compounding the pressure as the bottom lines are getting pressed. Apparently, the growing costs have led to lower-than-anticipated profits for almost 50% of the respondents, and the fact is that one in four now fears for the viability of the business. Although it is a positive sign that over 50% of firms are pretty optimistic when it comes to the second half of 2025, it is quite clear that targeted support is required so as to sustain this recovery and at the same time also help SMEs to thrive more.
The CIOB president, Paul Gandy, said that the SMEs happen to be the backbone of the construction sector, as they deliver homes the communities depend upon. With most of the people these days looking to make an enhancement when it comes to their existing properties rather than moving home, it is indeed quite pivotal for them as well as the wider economy that they can in a seamless way find dependable and competent builders in order to carry out work that’s both affordable as well as high quality.
He further said that if one is looking to ensure that the construction sector is sustainable, it becomes imperative that the smaller firms thrive. All this happens to mean tackling issues like late payments and making sure that the SMEs can hire apprentices with affordability and grow the skilled workforce that the sector so desperately needs. With that exact support, SMEs can surely continue to play their critical role when it comes to building a robust, resilient built scenario.