Banks stalling on agreed funding for projects

Small and medium sized building firms have sounded the alarm that banks are again withholding funding on projects.

Anecdotal evidence that banks have grown more cautious about lending to construction emerged from the latest survey of over 300 members of the Federation of Master Builders.

It follows recent data from the Bank of England that lending to construction since the collapse of Carillion has fallen for six consecutive months.

Meanwhile, a major contractor has told the Enquirer that it is struggling to extend credit for its early payment mechanism for subcontractors seeking to pay for better terms, despite rising demand from the supply chain.

The FMB trade survey also paints a picture of continuing material price rises and shortages of key trades in the third quarter.

Brian Berry, FMB chief executive, said: “Growth among the UK’s construction SMEs slowed in the third quarter of this year. A range of factors are at work here, not least ever-increasing material prices.

“Anecdotally, we are hearing worrying reports of banks withholding previously agreed funding for projects which is delaying start dates and dampening growth. This may or may not be related to Brexit-nerves.

He also warned the construction skills shortage is also taking its toll. More than two-thirds of construction SMEs were struggling to hire bricklayers.

“These latest figures match the highest we’ve noted since records began a decade ago. These skills shortages are also leading to projects being stalled because there physically aren’t enough people to build them.

“Worse still, the scarcity of trades means that when construction employers can find people, they are paying huge salaries which is putting further pressure on margins.”

He added:  “This slowdown in growth should ring alarm bells for the UK Government and give rise to a total rethink of its misguided post-Brexit immigration proposals.

“If construction firms are unable to hire migrant workers post-Brexit, the already severe skills crisis will worsen. This will mean we won’t be able to the build the new homes the Government is keen on delivering and infrastructure projects will grind to a halt.

“It is imperative that the post-Brexit immigration system allows construction firms to continue to hire workers of varying skill levels. We hope the Government heeds the warning that these latest results show, before it is too late.”

from Construction Enquirer http://www.constructionenquirer.com/2018/10/24/banks-stalling-on-agreed-funding-for-projects/

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