In a dire warning, among the many dire warnings issued almost daily across all sorts of sectors right now, the Federation of Master Builders published a press release which said that 65% of small building companies will run out of cash by June if they failed to get grant money from the Government.

This was the release:

Almost two thirds (65%) of small building companies won’t last more than two months without cash grants from the Government, according to new data from the Federation of Master Builders (FMB) released today.

Faced with relentless overheads, supply chain blockages, site closures, and difficulty accessing Government financial support schemes, stranded small builders are facing a grim future without urgent help. The FMB survey asked 332 small to medium-sized (SME) construction firms about the impact of the coronavirus. The results revealed:

Trading

• 68% of builders have stopped at least 91% of their operations and new inquiries have dropped by 64%.
• Of the work that has stopped, 80% say this is due to supply chain issues restricting the availability of products and materials; 65% experienced problems maintaining social distancing rules on often small, domestic sites.

Eligibility for Government schemes

• Just 4% of builders who have applied for the Coronavirus Business Interruption Loan Scheme (CBILS) have been successful. 86% are still waiting to hear from their bank, with 44% waiting more than 10 days.
• 95% of builders have not received Business Rates Relief from their local authority, with most being ineligible due to not owning business premises.
• 69% of directors of small limited companies said 80% of their monthly PAYE salary (available through the Coronavirus Job Retention Scheme) would not provide enough support to them during lockdown, as most of their income comes from dividends which isn’t covered by the scheme.

Ability to continue their business

• 84% of builders have ongoing costs that aren’t covered by Government schemes, the most common being insurance, rent, bills and vehicle and plant hire.
• 65% of builders say their business can survive for two months or less in the current circumstances, with almost a quarter (23%) saying that they will struggle to even get through the four weeks.
• 60% of builders believe the Government has not done enough to support them.

Brian Berry, Chief Executive of the FMB, said: “If the Government doesn’t act by extending grant support to more small businesses, the coronavirus will wipe out thousands of small building companies, significantly reducing the capacity of the construction industry to build the homes and infrastructure we need. Builders are suffering because work has stopped, through no fault of their own, but bills are still landing on their doormats. Builders urgently need more money in the bank to get through lockdown.”

Berry continued: “Too few builders have been able to get a Government-backed loan, pay themselves a decent wage as small business owners, or access financial aid from the Government because they don’t own business premises. The Government must step up its support for builders immediately with a cash grant system not linked to the business rates system.”

Berry concluded: “Builders in Scotland and Wales have access to cash grants, but those in England are being left out. The Government should ensure that small businesses across the UK have access to similar support, to help them to get through these difficult times, and get building again, when this is over”

Crisis within a crisis

This highlights the sheer size of the problems being caused by the coronavirus crisis. This is a two-part problem. In the past, such as the banking crisis or previous recessions, they have been either financially or economically driven. With COVID-19, we’re still in the middle of the health crisis, which in itself is causing a financial collapse the likes of which we only saw in the Great Depression. Except that in took 4 years to reach it’s worst levels. In a matter of weeks the entire global economy has been plunged into recession. US and UK GDP forecasts make for ludicrous reading.

Will the Government step in and help SME building companies? They have already launched a raft of measures to support business, self-employed workers, the furlough scheme, Universal Credit changes, VAT holidays, the list goes on. The Chancellor Rishi Sunak has apparently been looking at the Government guaranteeing 100% of CIBL loans, upping it from 80% in the hope that more banks will lending to ailing companies.

Some of you will also have picked up on the report that 65% of those that had stopped work had done so because they were struggling to maintain social distancing rules on small residential sites. This is a point many installers have made when deciding to keep their businesses closed for the duration of the lockdown. For small residential installers, working on small sites, painting social distancing rules is not easy.

Worryingly, new enquiries have dropped a staggering 64%. This impacts not only construction, but fenestration as a connected industry. Questions still remain as to what level of demand remains out there, with forecasts showing less than promising predictions.

Its becoming clearer each week that the economic fallout is becoming deeper and will take longer and longer to recover from. Right now however, the key to ensuring these businesses don’t fail, the Chancellor will hopefully be looking at this our of our economy and give it the support many other areas have seen in the past few weeks.

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