Further Signs of Weakness in Construction
The construction industry continued to display signs of weakness in the second quarter of 2019, according to the results of a survey of the supply chain’s product manufacturers, contractors, civil engineers and SME builders by the Construction Products Association.
The Construction Trade Survey for 2019 Q2 shows that during the quarter, growth in the sales of construction products was reported by 20% of heavy side manufacturers and only 9% of light side manufacturers. Similarly, it was only 5% of civil engineering contractors and 4% of SME builders that reported an increase in workloads during the quarter. In addition, hiring fell among SMEs and was the lowest in six years for product manufacturers. Growth was reported in orders, enquiries and anticipated sales, however, raising hopes that the supply chain’s near-term outlook is positive.
Commenting on the survey, Rebecca Larkin, Senior Economist at the CPA, said: “Forward-looking indicators in this quarter’s survey show that on the surface the construction industry has retained some of its optimism as we approach another possible Brexit date. Underneath this, however, there appear to be clear question marks over confidence, with hiring at its lowest level in six years among manufacturers and SMEs and a continued grappling with the rising costs of raw materials and wage bills.”
Brian Berry, Chief Executive of the Federation of Master Builders, said: “Years of Brexit uncertainty have resulted in construction bosses starting to change how they employ their workforce. To ensure their firms are ready for any economic shock-waves later this year, employers are reducing their number of direct employees and relying more on sub-contractors who are easier to shed if work dries up. The construction industry has always used a significant proportion of subbies but the fact that direct employment is decreasing, points to Brexit nerves among construction bosses. This is the reality on the ground of what happens when years of uncertainty are inflicted on the construction industry. Furthermore, apprenticeship training has taken a hit as construction bosses are reluctant to take on young people when they can’t be sure of future projects going ahead.”
Commenting, Chief Executive of the Civil Engineering Contractors Association (CECA) Alasdair Reisner said: “We welcome the fact that the market bounced back in 2019 Q2 after a couple of disappointing quarters. However, the infrastructure market remains fragile. There is nowhere near the level of growth we would expect from projected levels of investment, at a time when the UK should be redoubling its efforts to deliver strong economic growth ahead of Brexit.”
Key survey findings include:
- Sales of construction products rose in annual terms according to 20% of heavy side manufacturers and 9% of light side in Q2
- 5% of civil engineers, on balance, reported an increase in workloads during Q2
- On balance, 4% of SME contractors reported an increase in workloads in Q2 compared to three months earlier
- 15% of civil engineering firms reported a rise in new orders and 13% of SMEs reported an increase in enquiries in Q2, on balance
- A balance of 2% of SMEs reported a fall in employment during Q2, whilst only 13% of heavy side manufacturers reported an increase
- Overall costs increased for 87% of civil engineering contractors, whilst 94% of heavy side product manufacturers reported a rise in raw materials costs
NOTE TO EDITORS:
- The Construction Products Association represents the UK’s manufacturers and distributors of construction products and materials. The sector directly provides jobs for 337,000 people across 23,818 companies and has an annual turnover of more than £60.2 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.
Much of the CPA's work is focused on serving as the first point of contact for politicians and policy makers requiring advice and information about matters that affect construction products or the wider construction industry. This includes understanding the need for investment into manufacturing or the built environment, new housing and energy-saving retrofitting of the existing housing stock; helping to develop effective, UK and EU legislation, regulations and product standards; and promoting the role of manufacturers in delivering a resource efficient built environment.
- 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.
- 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.
- 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’.
- 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
Matt McKeown, CPA Communications Executive
Tel: 020 7323 3770