Weather disruption
and the demise of Carillion resulted in a mixed performance for the UK
construction supply chain in the first quarter of 2018 according to the
Construction Products Association’s Construction
Trade Survey for 2018 Q1.
The latest research
found that although activity continued to increase for main contractors and SME
builders, there was a smaller proportion of firms reporting a rise.
Additionally, civil
engineering firms reported a second consecutive fall in workloads and heavy
side product manufacturers’ sales, a leading indicator of structural and
groundworks, fell for the first time in five years. On the upside, more than
one quarter of firms surveyed expected orders, enquiries and product sales for
the year ahead to remain positive, although contractors reported that orders
were concentrated in the housing and infrastructure sectors. Combined, these
sectors account for over 35% of total construction output.
Commenting on the
survey, Rebecca Larkin, Senior Economist at the CPA, said: "The industry’s
run of growth was halted by a quarter that combined the liquidation of
Carillion and the snow disruption in February and March.
"Encouragingly, order
books throughout the supply chain suggest activity will pick up again
throughout the year. This appears to be driven by just two sectors, housing and
infrastructure, which are reliant on a ‘steady state’ of government support.
Private sector house building continues to benefit from Help to Buy, housing
associations are commencing activity under affordable homes funding programmes
and contract awards for major strategic infrastructure projects such as HS2 are
lining up a pipeline of longer-term infrastructure activity.”
CECA Chief
Executive, Alasdair Reisner, said: "2018 has seen challenging market
conditions in the UK's infrastructure sector, where the aftershocks of the
Carillion liquidation continue to be felt. We believe there is more the
Government can do to support the sector, by committing to projects outlined in
the National Infrastructure Delivery Plan and continuing to develop this
pipeline to secure economic growth. At the same time, our members are reporting
that they are expecting orders to turn into activity, as schemes come forward
to market in the coming year. While the first quarter of 2018 has proved a
challenging period for many of our members, we believe that there is light at
the end of the tunnel, and that industry will act as a platform for secure
growth in the coming years."
Richard Beresford,
Chief Executive of the National Federation of Builders (NFB), said: "The
CPA’s latest construction trade figures indicate lower output in larger
players. While the largest players are suffering, SMEs and regional contractors
have reported increases in both workloads and enquiries. Figures show that
clients could be splitting their risks away from just main contractors to
regional contractors and SMEs. This trend would contribute to the longer term
benefit of the industry, if maintained."
Key survey findings
include:
- On balance, 5% of main
building contractors reported that construction output rose in the first
quarter of 2018 compared with a year ago
- Half of specialist
contractors reported a fall in output during Q1
- 1% of civil engineers, on
balance, reported a decrease in workloads during Q1
- On balance, 8% of SME
contractors reported increased workloads in Q1 compared to three months
earlier
- Main contractors reported
that order books were lower in industrial, commercial and public
non-housing
- 24% of civil engineering
firms reported an increase in new orders in Q1, on balance
- 23% of SMEs and 50% of
specialist contractors reported an increase in enquiries in Q1, on balance
- Overall costs increased for
84% of civil engineering contractors, whilst 87% of main contractors, 90%
of heavy side manufacturers and 84% of light side manufacturers reported
raw materials costs rose in Q1
- 39% of main contractors
reported a fall in profit margins in Q1.
