SME Construction Sector Growth Goes Through Roof

Small and medium-sized businesses (SMEs) in the construction industry enjoyed the best quarter's performance for growth for more than three years and the highest employment levels for three years.

- Business output highest since Q3 2000 - New business orders highest since Q2 2001 - Employment levels highest since Q4 2000 Small and medium-sized businesses (SMEs) in the construction industry enjoyed the best quarter's performance for growth for more than three years and the highest employment levels for three years, according to the 'PKF SME Index', a quarterly survey of 800 SMEs operating in the manufacturing, construction and service sectors.

Output was up to 64.5 in Q4 - an increase from 58.3 in Q3 (where 50.0 is no growth) and the level of new orders rose from 57.0 in Q3 to 60.7 in Q4.

The increased levels of activity fuelled demand for additional staff and levels of employment reached their highest since Q4 2000 at 57.2.

Despite these encouraging findings, members of the PKF Growing Business Forum are concerned about a range of obstacles to achieving their business growth targets for 2004.

The continuing strength of sterling, uncertainty of world events and the global economy, red tape, and interest rates were cited by several respondents including Graham Emmerson, director of construction company, SEH Holdings in Ipswich.

As the construction continues to suffer from inflation-busting price rises in input costs - up to 60.0 in Q4 from 56.8 in Q3 - the Growing Business Forum members will be putting in place a number of strategies to improve profitability in 2004.

Cost cutting measures such as reducing overtime, reducing internal transaction costs and cutting out waste are going to be implemented.

Alternative, cheaper sources of raw materials and suppliers offering better pricing deals will also be tried out in an attempt to reduce costs.

Says Graham Emmerson, "Our main strategies will be keeping a tight hold on costs while seeking to increase turnover, and continuing to invest in modern plant and machinery".

Nick Winters, partner specialising in growing businesses at PKF, commenting on the Index findings, said: "While the overall picture from the construction sector looks good, it is a tough, competitive market out there which allows no opportunity to pass on any of the increased input costs.

Several of our respondents are suffering as a result of ongoing delays to PFI schemes and many are fearful of a rise in interest rates which could wipe out their already narrow margins.".

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