Majority of SME subcontractors struggle with material and labour shortages

Over half of SME subcontractors are experiencing challenges with costs and lack of availability of raw materials, revealed the latest data from Bibby Financial Services.


According to its latest Subcontracting Growth Report — which surveyed 250 subcontractors between 16th June to 5th July —  58% of respondents considered the increasing cost of raw materials as the biggest concern to their business, while 44% listed a shortage of skilled labour.

This comes in contrast to the increase in activity since restrictions began to lift, witnessed by 50% of SME subcontractors.

To offset the shortage in raw materials, four in ten (40%) have looked for new suppliers, while a quarter have either secured new suppliers (25%) or renegotiated with existing partners (24%). 

However, almost half (46%) have taken no such action and are prepared to pay more with existing suppliers, which may prove more damaging to their bottom line in the long-term.

With Brexit causing concern for many SMEs, 52% of respondents want the government to do more to ensure that tariffs on goods to and from the EU are avoided, to avoid a further increase in the price of raw materials.

Sharon Wiltshire, head of UK operations at Bibby Financial Services, said: “It has been a difficult year for the construction sector and for subcontractors especially. 

“SMEs, which make up the bulk of the sector, have shown incredible resilience in the face of protracted challenges. 

“However, it is likely that the true impact of Brexit-related skills and raw materials shortages, and the winding down of government support measures, are yet to be realised. 

“With subcontractors typically asked to pay a large proportion of labour and materials costs upfront, they are highly dependent on having a working level of cashflow at all times. 

“While we are seeing twice as many businesses use invoice finance compared to 2019 (8% to 4%), 41% still do not leverage external funding to support their operations. 

“As government loans come to an end, SMEs need to think proactively about the finance options they have available to manage rapidly changing costs, and plan for growth.”  

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