Key results from the FMB’s latest State of Trade Survey found that the overall indicator for the performance of Scottish construction SMEs dropped by 19 percentage points in Q4 2017 in terms of workloads, expected workloads and enquiries when compared with the previous quarter.

The quarterly assessment of the UK-wide SME construction sector also revealed that fewer construction SMEs predict rising workloads in the coming three months, down from 41% in the previous quarter to 38% in Q4 2017, while 87% of builders believe that material prices will rise in the next six months, up from 82% in the previous quarter.

Nearly two-thirds (61%) of construction SMEs also expect salaries and wages to increase in the next six months, the FMB added.

Gordon Nelson, director of FMB Scotland, said the dip in confidence followed seven consecutive quarters of growth for small builders in Scotland.

He said: “Scottish construction firms experienced a significant dip in the final quarter of 2017. Prior to these latest results, we had seen seven consecutive quarters of growth for small builders in Scotland. There are several contributing factors, not least the skills shortages which continue to hamper many SMEs, with rising shortages of key trades like carpenters, plumbers and plasterers. As a result, the wages for these increasingly scarce skilled trades continue to rise sharply.

“What’s more, material prices are also rising and almost 90% of builders think this trend will continue over the next six months. This means Scottish construction SMEs continue to see their margins squeezed, with many choosing to absorb costs rather than pass them onto their clients.”

Mr Nelson added: “Investment in housing and infrastructure can help to support the industry and boost the wider economy. As such, the Scottish Government has recently announced a £150 million injection into the Building Scotland Fund. This could be used to provide a much needed stimulus for some SME construction firms although we still await details regarding exactly how it will work.

“The construction industry is the cornerstone of the Scottish economy so it’s in all of our interests to do what we can to support the smaller companies which form the bedrock of the sector. If we are to see a return to growth in 2018, and sustainable growth beyond this year, we must collaborate with the Scottish Government to make sure these investments are well-targeted, and tackle the skills crisis by attracting more new talent into our industry.”

Across the UK, the FMB found that two-thirds of those running SME construction firms are struggling to hire bricklayers and carpenters as construction skills shortages hit a “record high”.

More than two-thirds (68%) of construction SMEs are struggling to hire bricklayers and 63% are struggling to hire carpenters and joiners – the highest figures since records began in 2008, the trade association said.

The number of firms reporting difficulties hiring plumbers and electricians (48%), plasterers (46%) and floorers (30%) also reached record highs.

Brian Berry, chief executive of the FMB, said: “The silver lining to current skills shortages among construction SMEs is that the numerous tradespeople and professionals, who may find themselves out of work following the collapse of Carillion, have a ready supply of alternative employers. The FMB is working with the Department for Work and Pensions and the Construction Industry Training Board to match-make ex-Carillion workers with small construction employers in need of skilled workers.

“We’re also working hard as an industry to re-home the 1,200 Carillion apprentices who are the innocent victims of the major contractor’s demise. It’s in everyone’s interests to ensure that these young people continue on their path to a rewarding career in construction.”