The Construction
Products Association’s State of Trade Survey for 2018 Q2 shows that the £56
billion UK construction products manufacturing industry began its catch-up of
activity lost to adverse weather conditions during the first three months of
the year.
Construction product
sales act as an early indicator of wider activity in the supply chain and these
results signpost to a rise in total construction output levels over the next 12
months.
Heavy side
manufacturers reported an increase in activity, with sales in Q2 rising for 40%
of firms, following two previous quarters of falling sales. For light side
manufacturers, 29% of firms on balance reported a decrease, which was the
weakest performance since 2012 Q3.
This reflects the
lagged impact of the industry’s decline in Q1, as light side products such as
insulation, boilers, glass and lighting tend to be used at the end of the
building process.
Manufacturers
anticipate a return to growth in the coming quarters, with 43% of heavy side
firms and 27% of those on the light side expecting an increase in sales over
the next 12 months. Input cost inflation continues to persist, however,
particularly for the energy-intensive heavy side, which is experiencing the
pass-through of rising global commodity prices on fuel and energy costs.
Rebecca Larkin, CPA
Senior Economist said: “These results fit the profile of construction catch-up
from a weather-affected Q1. As we’ve moved from a freezing Spring to a hot
Summer, groundworks and work on external structures has been able to resume,
and this has been reflected in increased sales for heavy side manufacturers.
The disruption in Q1 is likely to have delayed interiors and finishing works
starting on site which is evident in the decline in light side sales during Q2.
“Manufacturers’
product sales, capacity utilisation and new hiring are all still expected to
increase over the next year, but price pressure is coming from all directions
across fuel, energy, raw materials and labour, which is likely to be felt
throughout the construction supply chain.”
Key survey findings
include:
- A balance of 40% of heavy
side firms reported that construction product sales rose in the second
quarter of 2018 compared with the first quarter. 29% of light side firms,
on balance, reported a fall in sales in Q2.
- On an annual basis, sales
increased for 20% of heavy side firms and 12% of firms on the light side,
on balance
- On balance, 43% of heavy side
manufacturers anticipated a rise in sales in the next year, increasing
from a balance of 37% in the previous quarter
- On the light side, 27% of
firms expected an increase in product sales in the next year, compared to
a balance of 16% in 2018 Q1
- 27% of heavy side firms
increased headcount in the past year, the lowest balance in nearly five
years
- Annual cost increases were
reported by 73% of manufacturers on the heavy side and 50% on the light
side
- Raw materials costs rose
according to 87% of heavy side manufacturers and 88% of those on the light
side.
