A total of 49% of SME builders in the UK reported lower-than-expected profits or losses in the first half of 2025, according to a joint report by the Federation of Master Builders (FMB) and the Chartered Institute of Building (CIOB).
Although the industry is showing “strong signs of recovery” after a challenging end to 2024, acute skills shortages and rising costs driven by materials prices and wages continue to disrupt delivery and squeeze profits, the latest SME State of Trade Survey found.
Of the 458 FMB and CIOB members surveyed, 75% saw increased material costs and 67% reported rising wages and salaries. This is having an impact on growth, with one in four saying their business may be on the path to going bust, said the report.
Despite this gloom, more than half (51%) of firms have a positive outlook for the second half of the year. Additionally, construction SMEs also saw strong growth in workloads, enquiries, and employment, led by housebuilding and maintenance.
Of the home nations, the greatest increase in workloads and enquiries (36% and 64%, respectively) was in Northern Ireland, followed by Scotland (30% and 56%), Wales (24% and 50%) and England (21% and 18%).
‘Optimistic about H2’
Brian Berry, chief executive of the FMB, said: “Rising costs are compounding the pressure with bottom lines pressed. Increased costs have led to lower-than-expected profits for nearly half of respondents, and one in four now fear for their business’s viability. While it is a positive sign that more than half of firms are optimistic about the second half of the year, it’s clear that targeted support is needed to sustain this recovery and help SMEs thrive.”
Paul Gandy, CIOB president, added: “SMEs are the backbone of our construction industry – they deliver the homes our communities depend on. With many people these days choosing to improve their existing properties instead of moving home, it’s vital for them and the wider economy that they can easily find reliable and competent builders to carry out work which is both affordable and high quality.
“In short, if we want the construction industry to be sustainable, we must make it easier for smaller firms to thrive. That means tackling issues such as late payments, and ensuring SMEs can affordably hire apprentices to grow the skilled workforce our sector desperately needs. With the right support, SMEs can and will continue to play their crucial role in building a stronger, more resilient built environment.”
