The Construction
Products Association’s Construction Trade Survey for Q3 shows that despite
rising costs and diverging performance across sectors, the industry extended
its run of growth to eighteen quarters.
The survey of main
contractors, SME builders, civil engineering firms, product manufacturers and
specialist contractors found that the construction supply chain reported
increases 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 Q3. 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."
Key survey findings
include:
- 40% of main building
contractors, on balance, reported that construction output rose in the
third quarter of 2017 compared with a year ago
- 20% of specialist contractors
reported a rise in output during Q3
- 24% of civil engineers, on
balance, reported an increase in workloads during Q3
- On balance, 21% of SME
contractors reported increased workloads in Q3 compared to three months
earlier
- Main contractors reported
higher orders in private housing and both housing and non-housing R&M
- 13% of civil engineering
firms reported an increase in new orders in Q3, on balance
- 26% of SMEs but no specialist
contractors reported an increase in enquiries in Q3, on balance
- Overall costs increased for
82% of civil engineering contractors, whilst 92% of main contractors, 85%
of heavy side manufacturers and all light side manufacturers reported raw
materials costs rose in Q3.
