The latest State of Trade Survey from Build UK has shown that costs are continuing to rise with two thirds reporting higher labour costs than 12 months ago.

The state of trade survey covers the first quarter of 2016 and found that, while output rose slightly, 39% of respondents to the survey reported an increase in building costs with 43% saying labour costs had increased compared to the previous quarter and nearly two thirds reporting higher labour costs than a year ago.

Contractors remained positive overall about future prospects with 27% expecting workloads to rise during the next quarter and 52% expecting workloads to increase over the next year. Respondents to the survey said that the industrial and commercial sector as particular growth areas. Contractors also reported a strengthening in enquiries during the first quarter.

The survey also found that contractors are finding difficulty in recruiting supervisors, managers, professional and technical staff along with bricklayers and cladders. The main reasons stated were the low number of applicants with required skills (53%), a lack of required experience (53%) and a lack of qualifications (48%).

Worryingly the survey saw a rise in the number of contractors who expected work volumes to decline to 26%, up from 9% last quarter.

Suzannah Nichol, chief executive at Build UK, said: “There continue to be mixed messages in terms of growth, however, industry intelligence shows increasing levels of activity over the last quarter. Employers are experiencing both rising material and labour costs as they head towards maximum capacity and this continues to highlight difficulties in recruiting appropriate skills at all levels.”