Half of SME firms report lower-than-expected profits or losses

Cost increases and rising wages have led half of SME firms to report lower-than-expected profits or losses, a new report has revealed.

In their latest half-year SME State of Trade Survey, the Chartered Institute of Building (CIOB) and the Federation of Master Builders (FMB) have found a quarter of firms affected by skills shortages were forced to cancel jobs.

Six in 10 construction firms said they had been impacted by labour shortages resulting in half of their jobs being delayed.

Among those experiencing delays, 38 per cent were due to planning processes, 36 per cent were due to changing project parameters and 35 per cent were due to material/equipment delays as the primary cause.

The survey found 64 per cent of firms had found it difficult to recruit staff with knowledge of the new building safety regime, and 59 per cent reported difficulty finding staff with skills in modern sustainable building practices and new technologies.

A third of firms reported carpenters as the most difficult to recruit, followed by roofers and plumbers.

So far in 2025, three-quarters of firms have seen increased material costs, 67 per cent have experienced rising wages and 61 per cent have increased the price they charge for their work.

The impact has led a third of firms to say they expect to restrict recruitment and almost a quarter to fear they will be forced to make redundancies.

Brian Berry, fhief 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. It’s clear that targeted support is needed to sustain this recovery and help SMEs thrive.”

Despite this, the survey found the UK construction industry was showing strong signs of recovery in the first half of 2025 with SME builders seeing strong growth in workloads, enquiries and employment, led by housebuilding and maintenance.

“After a tough end to 2024, it’s welcome to see the construction sector turning a corner in the first half of 2025,” Berry said.

“However, recruitment remains a major challenge, with carpenters, roofers and plumbers among the hardest roles to fill and skills shortages are having a real impact on delivery.”

More than half reported that their invoices had been paid on time and 32 per cent received payments on a varied timeline, but one in 10 reported frequent late payments.

“In short, if we want the construction industry to be sustainable, we must make it easier for smaller firms to thrive,” CIOB president Paul Gandy said.

“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.”