Hidden impacts of Brexit taking their toll on British SMEs

Since the reopening of the construction sector in the summer of 2020, confidence has been sky high, with growth in March of 2021 the highest on record since 2014. According to figures from IHS Markit/CIPS, the growth of output had grown in line with increased commercial, domestic and civil engineering projects. These works have largely come in the form of restarting delayed projects, critically around office development, leisure and hospitality. New build residential work has also experienced a major boost, along with domestic renovation, with higher spends in both categories. As a sign of this growth, builders’ merchants such as Travis Pekins have registered a 6.8% increase in sales in the first three months of the year compared with the first quarter of 2020

However, the industry must tread cautiously, as the current growth projections carry a sting in the tail, potentially punishing small trades companies more harshly than ever before.

One could be excused for forgetting, but the initial Covid lockdown both in the UK and Europe was considerably tougher than the most recent events.
In March 2020 the entire UK material supply lines were put on pause for a number of weeks. While the headlines were dominated by the lack toilet paper and pasta, for the trade and construction sector this was plasterboard, cement and many other essential materials. The result of which was that prices of these products shot up rapidly as availability decreased.

While it’s easy to blame the pandemic for these short-term supply constraints, there is another fly in the ointment, Brexit. Without passing judgement on the decision to leave the EU, Brexit has lengthened the supply lines for a number of core supplies from Europe. A significant majority of materials required by UK trade and construction are manufactured or processed in mainland Europe. As the pandemic swept the continent almost all major countries suffered shortages in stock; now however, manufacturers are refilling the supply chains that are closer to home first, with the UK falling to the back of the queue.

While this should ease over time and it is encouraging to see a number of efforts to move material production to the UK, there is no quick fix. This has led to further hurt for SMEs in the trades as larger companies have been able to purchase these products at higher prices, to the detriment of their smaller competitors.

Ben Dyer, CEO of Powered Now, discusses the difficulties that are on the horizon for smaller businesses in the trades.

“At Powered Now we are delighted to witness the increase in both order books and confidence. Higher demand for construction and trade services has a real world trickle down to small and medium trade businesses.

However we are very worried about the implications of stress on the UK supply chain. While some of these issues will naturally clear as the threat of Covid and Brexit reduces, the short term impact on the smaller contractor market threatens to derail these good weeks of growth.

We are especially critical of larger firms choosing to stockpile. The industry is only as healthy as the workforce within it, and these larger companies rely on much smaller contractors to operate, of whom are being unfairly penalised. It is incredibly shortsighted of larger firms to use their leverage over smaller ones. Not only does this hurt the economy but will eventually catch up with them due to their reliance on the SME sector for contract staff. We hope this practice, like Covid, can eventually be eliminated.”