Small and medium-sized enterprises (SMEs) in the UK construction industry are struggling to access finance while concurrently showing optimism for future sales growth, according to the latest survey from Bibby Financial Services (BFS).

Polling nearly 1,000 UK SMEs, BFS’ SME Confidence Tracker reflects an “optimistic” yet “challenged” UK construction community in terms of accessing finance, a critical factor for sustaining and capitalising on this anticipated expansion.

Despite the majority of the 5.6 million SMEs in the UK predicting sales growth, they face hurdles such as record-high interest rates since the 2007/2008 financial crisis and persistent inflation.

These financial challenges are exacerbated by the impending general election and a stringent credit climate, which might block investments critical to strengthening the UK economy, according to the report.

Around 58% of SMEs in the construction industry expressed confidence in growing orders for 2025 but acknowledged substantial challenges.

Construction SMEs appear more willing to invest compared to other sectors, with only 38% holding off until post-election, versus the 46% average across other industries.

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However, the sector is grappling with inflation and supply chain issues, with 65% citing the soaring cost of materials as a primary concern. 

Bad debt has also impacted a third of construction SMEs in the past year, the report said. 

Inflation has been notably detrimental, with 56% identifying it as a key challenge, a figure that stands out against the 48% average for other sectors.

Meanwhile, supply chain disruptions are acutely felt, with 42% of construction SME owners citing it as a business impact, nearly twice the rate of other industries.

Access to external finance has become increasingly problematic, with 53% of construction SMEs reporting greater difficulty in obtaining it compared to six months before February 2024.

Furthermore, 43% have seen their need for such finance increase within the same timeframe. Banks’ reluctance to lend to small businesses has intensified, according to 59% of construction SME leaders.

BFS UK managing director Derek Ryan said: “Despite increasing optimism among SMEs and some signs that the economy is improving, sustained growth is hanging in the balance.

“Amid a testing credit environment and the corporate insolvency rate hitting a 30-year high in 2023, SME supply chains remain under pressure.”