Construction product manufacturers pessimistic of growth

The UK’s Construction Products Association's State of Trade Survey for 2Q17 reveals that UK construction product manufacturers experienced growth in sales and activity for the 17th consecutive quarter, but higher input costs and rising uncertainty has dampened manufacturers’ views for the near-term future.

Results of the survey showed that among heavyside manufacturers, only seven per cent anticipated a rise in sales in the next quarter, a decline from the 68 per cent who anticipated a rise when asked in 1Q17. A sharp rise in input costs was also reported in 2Q, with 93 per cent of heavyside manufacturers and all of those on the light side reporting an increase in costs compared with a year earlier.

The strongest inflationary pressures came from raw materials, fuel and energy, owing to depreciation in sterling during 2016, alongside skills shortages pushing up wage bills.

The construction products manufacturing industry has an annual turnover of GBP55bn, directly providing jobs for 300,000 people across 22,000 companies. Products range from ‘heavy side’ materials such as steel, bricks, timber and concrete to ‘light side’ products such as insulation, boilers, glass and lighting. On an annual basis, 47 per cent of heavy side firms reported that sales had increased in 2Q, whilst on the light side, 45 per cent of firms reported that sales were higher than a year earlier.

Rebecca Larkin, CPA senior economist, said: “It was an eventful quarter on the political front, with the announcement of a snap general election and the resulting hung parliament adding to existing uncertainty over the path for Brexit negotiations. Despite healthy growth in the second quarter, construction product manufacturers have turned more pessimistic over performance for the rest of the year, reigniting concern that the triple hit of imported inflation in raw materials, higher fuel and energy prices and the persistent pressure on labour costs will have a negative impact on demand and construction activity over the next 12 months.

 "An increase in overall costs was reported by 93 per cent of heavyside manufacturers and all of those on the light side. Inflation is expected to endure as similar proportions anticipate that costs will continue to climb over the next year. Government’s ability to progress the pipeline for large public sector and infrastructure projects is now more important than ever as a means of sustaining activity when private sector decision-making may be stalling.”