Construction Products Association

Monday, November 7, 2016

Construction Defies Brexit Pessimism in Q3 but Costs a Growing Threat

Monday 07 November 2016

The Construction Product Association’s latest Construction Trade Survey, published today, shows that the construction industry grew for a fourteenth consecutive quarter in Q3. Firms across all areas of construction reported an increase in activity, including building contractors, SMEs, specialist contractors, civil engineers and product manufacturers. Indicators of future growth weakened, however, and activity may be severely hindered by inflationary pressures caused by rising wages and imported raw materials costs.


Commenting on the survey, Rebecca Larkin, Senior Economist at the CPA, said, “Following the EU referendum, the entire construction supply chain reported favourable conditions and growth in activity in Q3. Forward-looking expectations for Q4 and the year ahead were more pessimistic, with the majority of orders and enquiries balances the lowest in two years, or driven by a single sector: private housing.


“A further factor that stood out as a downside risk to activity in the near-term is the sharp rise in the cost of imported raw materials due to the recent depreciation in the Sterling, which is providing a dual hit to construction costs alongside existing wage inflation pressures.”


Suzannah Nichol, Chief Executive of Build UK said, “While the industry demonstrated its resilience by continuing to grow during Q3, we can see that projects are increasingly affected by construction’s skills challenges. By getting behind the recommendations of the ‘Farmer Review’ and delivering on the industry’s commitment at the Construction News Summit Skills Hack to reform the skills system, we can address these challenges and achieve change throughout the supply chain.”


Marie-Claude Hemming, Head of External Affairs at CECA said, “It is disappointing that our members continue to report weak growth in their workloads. The infrastructure sector is a vital driver of growth in the UK economy. While recent Government decisions to commit to large infrastructure projects at Heathrow and Hinkley Point are welcome, it is clear that the last quarter has seen a lull in activity.”


Key survey findings include:
• 33% of main building contractors, on balance, reported that construction output rose in the third quarter of 2016 compared with a year ago
• A balance of 7% of specialist contractors reported a rise in output during Q3
• 1% of civil engineers, on balance, reported an increase in workloads during Q3
• On balance, 18% of SME contractors reported increased workloads in Q3 compared to three months earlier
• Main contractors reported an increase in orders in private housing but reported a decrease in all other sectors
• 6% of SMEs and no specialist contractors reported an increase in enquiries in Q3, on balance
• 3% of civil engineering firms reported an increase in new orders in Q3, on balance.
• 54% of main contractors reported difficulties recruiting bricklayers, 47% for carpenters and 43% for plasterers in Q3
• Overall costs increased for 59% of civil engineers contractors, whilst 66% of main contractors reported raw materials costs rose in Q3 compared with the previous quarter


ENDS


NOTE TO EDITORS:
1. The Construction Products Association represents the UK’s manufacturers and distributors of construction products and materials. The sector directly provides jobs for 313,000 people across 21,000 companies and has an annual turnover of more than £50 billion. The Association is the leading voice to promote and campaign for this vital UK industry.
The CPA produces a range of economic reports including the quarterly Construction Industry Forecasts, Construction Trade Surveys and the State of Trade Surveys.
2. Build UK provides a strong collective voice for the contracting supply chain in construction. Build UK brings together 27 of the industry’s largest main contractors and 40 leading trade associations representing over 11,500 specialist contractors. Build UK was created as a result of a merger between the National Specialist Contractors’ Council (NSCC) and UK Contractors Group (UKCG) in 2015.
3. The Civil Engineering Contractors Association (CECA) has over 300 member firms that carry more than 80% of all civil engineering work in Great Britain. The CECA survey of civil engineering workload trends, in which more than a third of the membership takes part, tests for changes over the past year in contractors’ workload, workforce, order books, cost trends, and tender prices. It also examines the supply situation for key resources, and contractors’ expectations of trends in new orders and employment in the coming 12 months.


4. The Federation of Master Builders (FMB) is the largest trade association in the UK construction industry representing thousands of firms in England, Scotland, Wales and Northern Ireland. Established in 1941 to protect the interests of small and medium-sized (SME) construction firms, the FMB is independent and non-profit making, lobbying for members’ interests at both the national and local level. Within its membership, around 45% of FMB members build new homes either as their primary function or as part of the suite of building services they provide, but most are primarily active in the domestic RM&I market. The FMB is committed to raising quality in the construction industry and offers a free service to consumers called ‘Find a Builder’.


5. The National Federation of Builders (NFB) represents around 1,500 builders and contractors across England and Wales. In addition to providing specialist advice and business services, the federation, with a network of four regional offices, lobbies local, national and European government on a range of issues to sustain positive trading conditions for members. With origins dating back to 1876, today's NFB is a modern organisation providing the medium sized contractor and smaller builder with an unparalleled package of services.
FOR FURTHER INFORMATION CONTACT:
Rebecca Larkin, CPA Senior Economist
Tel: 020 7323 3770
E-mail: rebecca.larkin@constructionproducts.org.uk
Jeff May, CPA Marketing and Communications Manager
Tel: 07904 476 166
E-mail: jeff.may@constructionproducts.org.uk


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Enquiries

For enquiries please contact: Matt McKeown matt.mckeown@constructionproducts.org.uk