The construction
industry experienced a mixed quarter for sales, output and new orders in the
final three months of 2018, according to a quarterly survey of the supply
chain’s product manufacturers, contractors, civil engineers and SME builders by
the Construction Products
Association.
The Construction
Products Association’s Construction Trade Survey for 2018 Q4 shows that
during the quarter, sales of construction products rose according to 55% of
heavy side manufacturers and 21% of light side manufacturers, whilst 25% of SME
builders reported an increase in workloads.
Meanwhile,
construction output has experienced its weakest year-on-year growth since 2012,
according to new Office for National Statistics data.
According
to the latest ONS construction output update, there was just a 0.7% increase in
output last year compared with 2017, which is the lowest year-on-year
growth since 2012, when output fell by 6.9%.
Output
also fell by 0.3% in the last quarter of 2018, following an increase of 2.1% in
quarter three, driven by a fall in repair and maintenance output, which was
down by 2.8%. According to the ONS, the decrease in repair and maintenance work
was caused by drops in private housing and non-housing repair and maintenance
output of 4.0% and 2.9% respectively.
The CPA survey show
output, new orders and enquiries were reported lower by main building
contractors, specialist contractors and civil engineering contractors.
Rising costs for raw
materials continued to filter through the supply chain, as reported by
two-thirds of main contractors, 82% of heavy side product manufacturers and 74%
of light side manufacturers and combined with lower volumes of work, continued
to squeeze profit margins for building contractors.
Commenting on the
survey, Rebecca Larkin, Senior Economist at the CPA, said: "Parts of the
construction supply chain have clearly started to feel the effects of the falls
in new orders since the EU referendum translating into reduced activity in sectors
such as high-end residential, commercial offices and industrial factories.
"The
uncertainty that precludes investment decisions in these sectors with a high
upfront outlay may also be benefiting other areas of the supply chain.
"Product
manufacturers’ optimism looking towards 2019 may be reflective of continued
high levels of activity in buoyant regions outside of the South East, as well
as an element of precautionary stockpiling on-site providing a near-term sales
uplift."
Brian Berry, Chief
Executive of the Federation of Master Builders, said: "Workloads for small
construction firms continued to rise in the last quarter of 2018 but after 23
consecutive quarters of growth, these latest results could mark a tipping point.
"Mounting
Brexit uncertainty is starting to have a tangible effect and the indicators are
not good with almost half of builders reporting signs of a weakening housing
market. Furthermore, a worrying one in five construction SMEs has had projects
stalled in the past three months due to delays to loans, or loan refusals, from
the banks. Together with ever-rising costs due to material price hikes and
labour shortages, the headwinds are blowing in the wrong direction for the UK
construction sector."
Commenting, Build UK
Policy Manager, David Bishop said: "The latest State of Trade result
highlights a difficult Q4 with half of main contractors and a quarter of
specialists reporting a decrease in output compared to this time last year.
Furthermore the lack of required skills remains a concern along with the
ongoing uncertainty caused by Brexit.
"Build UK has
worked with other industry bodies, including all those involved in proceeding
the State of Trade, to collate a report which identifies occupations that are
experiencing, or may experience, shortages of available staff in the UK construction
sector. This has been shared with industry and government."
Key survey findings
include:
- On balance, 46% of main
building contractors and 25% of specialist contractors reported that
construction output fell in the fourth quarter of 2018 compared with a
year ago
- 3% of civil engineers, on
balance, reported a decrease in workloads during Q4
- On balance, 25% of SME
contractors reported increased workloads in Q4 compared to three months
earlier
- Main contractors reported
that order books were only higher in the housing R&M sector
- 8% of civil engineering firms
reported a decrease in new orders in Q4, on balance
- 14% of SMEs reported an
increase in enquiries in Q4, on balance; enquiries fell for 25% of
specialist contractors
- Overall costs increased for
86% of civil engineering contractors, whilst two-thirds of main
contractors, 82% of heavy side product manufacturers and 74% of light side
manufacturers reported a rise in raw materials costs
- Profit margins fell for 13%
of main contractors and 40% of specialist contractors in Q4.
