What key issues are SMEs facing this year?

SMEs are a key component of the construction sector that are fundamental to national and international economies. Three small business leaders outline the main challenges that UK construction SMEs face in 2024


  • Daniel Salisbury MRICS
  • James Sheppard MRICS
  • Paul Smith MRICS

02 May 2024

Overhead image of York city centre

It can sometimes seem like there are two different sectors within the construction industry – one dominated by global corporations, giant budgets and megaprojects, and the other small in stature, working on individual projects in a local region.

However, small does not mean insignificant – last year the Federation for Small Businesses reported that SMEs accounted for three-fifths of employment and approximately half the turnover of the UK private sector.

These 5.5m individual businesses are an essential part of the professional ecosystem and the construction industry in particular, as 16% of all SMEs belong to this sector.

Moreover, the majority of RICS members are or belong to an SME. These businesses may be small, but they carry great weight and significance in both the UK and global economies.

While SMEs are keenly aware of the macro issues facing the economy at large as well as global businesses, the effects of these trends are experienced in very different ways at a local level.

Construction Journal asked three small business leaders what they felt are the biggest issues facing the UK SME community in 2024.

Implementing technology

James Sheppard MRICS, of London-based Equals Consulting, identified technology as a key factor in the success or failure of SME businesses this year.

'As usual, with any construction industry trend, there is a lot of chat from the big players on AI and ConTech, without any real tangible evidence of implementation.

The key issue facing us in the short term is establishing how we can best use technology to improve the efficiency of our consultancy work and remain current in a fast-changing technology climate.

We are genuinely concerned with remaining competitive and profitable, and as an SME it is more difficult to carve out budget for research and implementation.

We think bigger players are currently better placed to take advantage of ConTech to do this, and this will make them more competitive in fee bids, in tandem with higher profitability.

It is going to be a challenge, but we see real benefits in establishing what we should be doing.

We have created a task force to look at our processes and the available solutions to inform strategic decision making.

We want to get to grips with the reality of how ConTech is going to affect the industry so we can enable our staff to do what they do best – giving expert advice to support our clients, rather than spending time on administrative tasks.

SMEs really need to engage with this issue, as the speed of uptake in everyday tools will be exponential, far more than CAD or BIM uptake.

AI has to be accepted and used as a tool, but we also need to develop our people alongside our technology.'

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Lingering uncertainty following legislation

Paul Smith MRICS of PSC Surveying comments:

'As a north-east based construction consultant, we continue to experience delays with the delivery of projects due to the planning system which still appears to be under resourced, as has been widely reported for several years now.

The failure of local authorities to stick to their statutory timeframe prevents clients from taking schemes forward, which is contributing to the housing shortage and the lack of economic development.

We are also faced with an inadequate public transport system which has compromised our productivity.

Because of the lack of a reliable train network, we have to drive to site, rather than being able to sit on a train working and generating fees while commuting.

This pushes up fees while reducing our income, and means that we are declining instructions where we cannot get to a project by train reliably. 

Let's not even mention our increased carbon footprint as a result of our enforced reliance on cars.

The recent introduction of the Building Safety Act 2022 appears to have caught the industry a little unprepared.

Clients are aware that the HSE has not made arrangements to resource their statutory obligations in relation to the three gateway processes, as they have not appointed approved inspectors to perform the mandatory checks.

Clients are suspending high-rise residential projects due to the fear that the HSE will not undertake their duties within the 12 weeks set out by the Act, and thus developers may be faced with multi-million-pound delays to projects.

Some developers are redesigning residential schemes to lower the height of structures to mitigate these unacceptable delays which as a result reduces the total number of apartments delivered.

Delays and uncertainty are also affecting non-residential alterations in existing mixed-use high-rise projects.

The regulator seems to think that any works within the high-rise commercial elements of a scheme are subject to the three gateways. We are not convinced this is what was intended in the legislation.

Many consultants are  unwilling to take on the Principal Designer (Building Act) role, as distinct from the Construction (Design and Management) Regulations 2015 role, partly because of a perceived increased risk of criminal prosecutions.

The industry's unwillingness to accept this new liability is creating issues with starts on site.'

Current costing

Labour and material shortages are an ongoing issue for the sector as a whole, and while they are no longer breaking news, these shortages are still having an impact on development.

Daniel Salisbury MRICS, of SASS UK, has operated in York since 2018, having previously worked in Kent for two decades.

He says that the level of labour and material availability is the lowest he has experienced in a long time.

'By far the greatest challenge that I face is finding suitably qualified contractors with sufficient resources to tender or complete works.

Much of my work involves high-end residential surveys on £1m+ properties, with clients often asking if I am able to recommend contractors to undertake works or general improvements that they may wish to complete.

It's not unusual for the client to retain my services to provide sketch proposals and detailed designs for submission to planning, followed in most instances with working drawings and a detailed schedule of works.

Then comes the challenge – phoning my regular contractors to enquire whether they have capacity, listening to how much busier they are this year compared to last, conceding that perhaps three weeks might be a little tight for pricing and asking how about four instead.

Inevitably, around week three I receive an email asking for a little more time while they pester their own subcontractors and suppliers for prices and availability.

Eventually, after five or sometimes six weeks, a quotation of sorts arrives, often sent late on a Sunday evening, rarely costing individual items, and often including more provisional sums than anticipated because they've simply not been able to secure firm estimates from their own regular suppliers.

Meanwhile my client is chasing me, eagerly awaiting the tender report or even a hint of costs, and clarification of whether they need to start clearing rooms before the contractor's impending arrival.

"Will we be in by Christmas?" they ask, unaware that the contractor offering the lowest price has just emailed me to advise that they've taken on yet another project and are now unlikely to have scope to consider this one before next Easter, by which time the costs will have increased substantially and they may have lost half their subcontractors.

I would like to think that this is a recent phenomenon arising from a combination of Brexit, COVID-19, inflation, and the lack of skilled labour joining the industry.

The reasons may well be numerous and varied, but despite potentially healthy profits to be made, the fact remains that the industry has failed to attract interest from young men and women.

Not long ago, up until the turn of the past century, there seemed to be an appetite for apprenticeships, training and qualifications in our industry. Yet it seems the momentum has been lost, together with the availability of suitably qualified contractors, keen to turn an honest profit.

In recent times I have spoken to a number of construction professionals in my region who appear to be so disillusioned with the situation that they are seriously considering early retirement or alternative careers, where they hope for less red tape and a better night's sleep.

It's a sad state of affairs, and I'm not sure I can see an end to it anytime soon.

'By far the greatest challenge that I face is finding suitably qualified contractors with sufficient resources to tender or complete works'

Daniel Salisbury MRICS is a chartered building surveyor and CEO of SASS UK

Contact Daniel: Email

James Sheppard MRICS is a chartered project manager and director at Equals Consulting

Contact James: Email

Paul Smith MRICS is a cost consultant and founding director of PSC Surveying Ltd

Contact Paul: Email  

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