In it's latest State of Trade Survey, the Federation of Master Builders (FMB) revealed that despite Q2 2016 recording a 17th consecutive quarter of positive growth, the increase was at a slower rate in most parts of the UK than the first three months of 2017.
In addition, 83% of builders believe that material prices will rise in the next six months, while firms are also continuing to struggle to recruit skilled labour; 60% are struggling to hire bricklayers; % are struggling to hire carpenters and joiners; and 47% are struggling to hire plumbers.
Almost one in two SMEs predict rising workloads in the coming three months, with just 9% predicting a decrease in activity.
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However, England was the only home nation whose construction SME sector grew at the same rate as Q1 2017.
In Scotland, growth among builders slowed significantly, with SMEs experiencing a double-digit decline of 22£ to +13.
One-in-four construction SMEs in Scotland now predict rising workloads in the coming months – down from one-in-two predicted rising workloads three months earlier.
Brian Berry, Chief Executive of the FMB, said: "Rising material prices and salaries could be starting to dampen growth among construction SMEs. However, it is encouraging to see that the sector has continued to grow despite the recent snap General Election and the resulting hung Parliament.
"The construction SME sector is particularly vulnerable to any dips in consumer confidence that might come from periods of political uncertainty. It may be that a number of home owners decided to delay any big spending decisions on new extensions or loft conversions while the election campaign was underway – this would account for the slow-down in growth seen in the second quarter of 2017.
"The majority of construction SMEs are struggling to recruit key tradespeople such as bricklayers and carpenters and we're seeing shortages in other trades, such as plumbers and plasterers, starting to creep up.
"With Brexit on the horizon and worrying talk of the so-called 'Tier 2' immigration system replacing the free movement of people, the construction industry urges Ministers to bear in mind their strategic house building and infrastructure targets before pulling up the drawbridge on EU migrant workers."
(LM/MH)
