A third of all small to medium-sized building firms fear they will have to reduce staffing levels this year as the decline in the construction industry continues, warns the Federation of Master Builders (FMB).

The pessimistic outlook for the building industry comes from the FMB's latest State of Trade Survey (Download, PDF 256 KB). With employment continuing to fall in the last three months of 2012, coupled with the rising cost of overheads such as wages and materials, building firms believe the outlook for 2013 is bleak.

The survey shows that builders' workloads decreased last year, and are expected to keep falling at least for the first half of 2013. However, the rate at which workloads and employment in the housing sector fell did slow in the fourth quarter of last year, with many specialist trades reporting the first rise in employment since early 2011. In the non-residential sector there were no such signs of encouragement. Many firms said they may have to introduce price rises as overheads continue to eat into profit margins and the likelihood of lay-offs loomed.

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Brian Berry, the FMB’s Chief Executive, said: "These figures reinforce what we already knew that 2012 was a very tough year for construction, and the outlook for 2013 is still bleak. The Government must act now to support building firms and prevent workers from losing their jobs over the next 12 months.

"The Government's support for infrastructure spending is good but it needs to look at ways it can boost the building industry, not least the urgent need to build more new homes by freeing up land, easing planning red tape and by pushing investment through its new Business Bank. A VAT cut on building work to make homes more energy-efficient would also help provide an immediate boost for small builders and have the multiple benefits of boosting the economy, helping householders save money on their fuel bills and reducing carbon emissions."

(CD/GK)