The Construction Products Association’s Construction Trade Survey for 3Q17 shows that, despite rising costs and diverging performance across sectors, the industry extended its run of growth to eighteen quarters.
The survey of main constractors, SME builders, civil engineering firms, product manufacturers, and specialist contractors, found that the construction supply chain reported increase in sales, output, and workloads in the quarter, driven by increased demand in private housing, repair, and maintenance and infrastructure. Net balances for enquiries and expected product sales for the year ahead remained muted, however, and contractors’ order books were sustained by work in only three sectors: private housing, housing R&M, and non-housing R&M. New orders were reported lower in sectors such as commercial, industrial, and public non-housing, which account for one-third of construction output.
The effects of the Sterling's depreciation in the second half of 2016, following the EU Referendum, are still pervasive, with 92% of main contractors, 85% of heavy side manufacturers and all light side manufacturers reporting a rise in raw materials costs in 3Q17. In spite of this, only a small proportion of contractors are increasing tender prices and, as a result, 31% of main contractors reported a fall in margins, the worst balance in five years.
Commenting on the survey, Rebecca Larkin, Senior Economist at the CPA, said: "This 18th consecutive quarter of growth reported by the industry stands in contrast to the construction recession in preliminary GDP data from the ONS. There is a clear division in fortunes across sectors, however, with weakness in the commercial and industrial sectors offset by strength in new build private housing, a sector where demand and confidence remain supported by the Help to Buy equity loan.
"In common with the wider economy, the construction industry continues to experience cost inflation, particularly for raw materials. A clear consequence of the supply chain trying to absorb these higher costs is the fall in contractors' profit margins since the start of the year. Combined with a smaller pipeline of upcoming work in some key sectors, the survey’s more mixed view on near-term industry prospects is not surprising."
Suzannah Nichol, Chief Executive of Build UK said: "The latest Construction Trade Survey result highlights the industry's continued growth, contrary to ONS’s statistics, with both contractors and specialist contractors reporting a rise in output during Q3. However, a lack of required skills remains a concern, with labour availability issues continuing to impact on contractors' business performance. Build UK believes industry needs to recruit, train and retain a skilled workforce and we are working with members, government and other key stakeholders to ensure that this remains a key priority."
CECA Director of External Affairs, Marie-Claude Hemming, said: "It is good news that our members see growth in infrastructure, to the benefit of businesses and communities across the country. However, uncertainty continues to act as a drag on the ability of the construction industry more generally to boost the economy. Ahead of the Autumn Budget, we are calling on the UK Government to commit to the projects outlined in the National Infrastructure Delivery Plan, to secure the foundations of a strong economy, drive productivity, and deliver post-Brexit growth."
Read the article online at: https://www.worldcement.com/europe-cis/09112017/uk-construction-industry-continues-to-grow/