SME construction sector stays rock solid

A PKF Accountants and Business Advisers product story

Edited by the Buildingtalk editorial team Oct 19, 2005

SME construction sector continued to outperform both other SME sectors and UK private companies as a whole during the third quarter, according to the PKF SME Index.

The SME construction sector continued to outperform both other SME sectors and UK private companies as a whole during the third quarter, according to the 'PKF SME Index', a quarterly survey of 800 SMEs operating in the manufacturing, construction and service sectors.

Output in the third quarter of 2005 was 61.2, up from 58.0 in the first quarter (where marks above 50 indicate expansion and marks below 50 indicate contraction).

This was considerably above the UK SME average of 52.2 and even above the UK average for all companies of 54.4.

Most respondents said that they had either been awarded new contracts or were busy working on existing orders.

The only blip appears to be the slowdown in some retail projects.

The buoyancy enjoyed by SME construction firms contrasts sharply with weakening demand in the service sector and a manufacturing sector up against rising oil and fuel prices and strong overseas competition.

While employment levels are flat (50.6) for SMEs as a whole, construction companies are continuing to take on staff (55.2) to meet contract commitments and higher work volumes.

Input cost inflation continues to rise at 61.3 largely as a result of high oil and fuel costs.

Stuart Barnsdall, partner specialising in growing businesses at PKF, commenting on the SME Index findings, said: "The construction sector is clearly enjoying strong demand at the moment which is unlikely to diminish in the short to medium term.

It would appear that the major factor currently holding the industry back is the shortage of skilled construction workers which could push costs up and squeeze profitability as companies struggle to recruit and retain scarce resources.

"It would be in the industry's interest to invest now in initiatives that promote the benefits of working in the construction industry to young people, particularly as major regeneration projects such as the London Olympics and the Thames Gateway will keep construction professionals in work for many years to come.".