Builders’ boom is bright spot in downbeat SME survey

Small and medium-sized construction companies have recorded the biggest increase in new business for two and a half years, a survey compiled by NatWest has found.
Building company bosses suggested that improving demand for residential work, alongside lower borrowing costs and a general increase in business confidence since the general election, had helped to boost their order books.
Headcounts also nudged up, as construction firms recruited staff to meet the increasing demand. Among them was Pentalec, a Kent-based building services contractor which has grown headcount from 59 to 85 so far this year.
But it was a bright spot in an otherwise mixed picture, according to the NatWest SME Growth Tracker, which monitors business performance and sentiment at UK companies with fewer than 250 employees. The survey is based on the responses of 850 companies based in Britain as part of a purchasing managers’ index researched by S&P Global.
Overall, the rate of output growth by small and medium-sized firms in the last quarter was the lowest since October 2023. This was driven largely by a downturn in business among services companies, who saw the sharpest decrease in activity for a year. Survey respondents attribute some of the decline to caution among clients ahead of the chancellor’s first budget on October 30.
Service business owners remain upbeat about their longer term prospects, however, and continue to recruit new staff to support growth plans, with the pace of job creation in September outstripping recruitment at their larger rivals.
The same could not be said for manufacturers, where confidence dipped to its lowest in 2024 so far and headcounts shrank. The decrease in staffing numbers was probably a result of companies choosing not to replace people leaving, rather than redundancies, due to high wage bills. Other survey respondents cited higher shipping fees, energy costs and raw material prices, as well as higher packaging costs.
Laura Capper, head of construction and manufacturing at NatWest, said there were plenty of glimmers of hope in the research.
“While the drop in output and new orders is certainly a challenge for [small and medium-sized] manufacturers, it’s encouraging to see that the reduction in staffing remains modest, and confidence in future growth remains,” she said. “The focus on new product launches and strategic business expansion plans shows that many firms are still positioning for long-term success, despite current headwinds.”
The NatWest survey also assessed business leaders’ attitudes to investing in becoming more sustainable. It found that only 34 per cent of the companies viewed sustainability as a high priority for the next year, a two percentage point decrease since the second quarter of 2024 and the lowest since the survey began in 2020.