Signs of weakness in UK construction

Latest News Thu, May 9, 2019 1:29 PM

The construction industry experienced a mixed quarter for products sales, output and new orders in the opening three months of 2019, 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 2019 Q1 shows that during the quarter, sales of construction products rose according to 54% of heavy side manufacturers and 29% of light side manufacturers.

In contrast, 20% of main contractors reported a decrease in output during the quarter, whilst workloads were reported lower for 17% of civil engineering contractors and 7% of SME builders.

Only product manufacturers and SME builders reported positive readings in forward-looking indicators, with a broad-based fall in new orders reported by main contractors and civil engineers.

Commenting on the survey, Rebecca Larkin, Senior Economist at the CPA, said: “The year opened with a mixed quarter of performance for construction. Confidence among consumers and businesses remains low and this has reduced the amount of work coming through to the two largest construction sectors, private housing and commercial, which require greater visibility over the economy’s future growth path to see projects get the go-ahead.

"By itself this raises concern over the extent to which the political stalemate over Brexit is affecting UK construction, but the risks are intensified when combined with the prevailing narrative of rising costs for labour, raw materials and fuel eroding contractors’ margins.”

Richard Beresford, Chief Executive of the National Federation of Builders, said: “Member reporting indicates bad news for the sector as material costs keep increasing while contractors’ order books continue to decrease. While companies can take steps to prepare their business for exit from the EU, the pace of progress by the Government continues to affect confidence and highlights the need for greater certainty."

Commenting, Director of External Affairs for the Civil Engineering Contractors Association (CECA), Marie-Claude Hemming, said: “We are concerned that the industry is experiencing a decline in output at a time when the Government should be taking steps to shore up the economy. A decline in growth will have ramifications for businesses and communities who rely on our members to deliver the world-class infrastructure the UK needs.”

Key survey findings include:

  • Sales of construction products rose in annual terms according to 54% of heavy side manufacturers and 29% of light side in Q1
  • On balance, 20% of main building contractors reported that construction output fell in the first quarter of 2019 compared with a year ago
  • 17% of civil engineers, on balance, reported a decrease in workloads during Q1
  • On balance, 7% of SME contractors reported a decrease in workloads in Q1 compared to three months earlier
  • Main contractors reported that order books were lower or unchanged in all sectors in Q1
  • 15% of civil engineering firms reported a decrease in new orders in Q1, on balance
  • 16% of SMEs reported an increase in enquiries in Q1, on balance
  • Overall costs increased for 91% of civil engineering contractors, whilst 60% of main contractors, 85% of heavy side product manufacturers and 82% of light side manufacturers reported a rise in raw materials costs
  • Profit margins fell for half of main contractors during the quarter.

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