8 October 2018

Construction manufacturers hope to end year on a high

Construction products manufacturing returned to business as usual in Q3 after the weather-related pauses and subsequent catch-up in the first half of the year. Britain’s £56bn industry is cautiously optimistic that the year will finish strong, with sales anticipated to pick-up in Q4.

Sales volumes, quarter-on-quarter.

The Construction Products Association’s latest State of Trade survey reveals that product sales, which act as an early indicator of wider activity in the UK construction supply chain, increased in 2018 Q3. For heavy side manufacturers, 27 percent reported that sales increased; this was below the 40 percent that reported a rise in sales in a weather-boosted Q2, but in line with the average survey balance for 2017. On the light side, which includes products such as insulation, boilers, glass and lighting, 27 percent of manufacturers also reported that sales rose, marking the first increase of 2018.

Manufacturers anticipate growth continuing in Q4, with 18 percent of heavy side firms and 43 percent of those on the light side expecting an increase in sales during the quarter. Manufacturers also reported that labour cost pressures began to subside in Q3. Two-thirds of heavy side firms reported an increase in wages and salaries, but this was the lowest balance since 2013 Q4. In contrast, cost inflation for fuel and raw materials remained elevated.

Rebecca Larkin, CPA senior economist, said: “Given the unprecedented levels of economic uncertainty around Brexit and the weather-related distortions in the first half of the year, signs of a steady expansion in Q3 for construction product manufacturing and the building activity it delivers into are reassuring. Manufacturers remain cautiously optimistic and expect sales to increase in the fourth quarter, but it will be the political developments in Q4 that are crucial in setting the backdrop for this to become a reality.

“Cost pressures appear to have started easing on the labour side, but with continued weakness in sterling and the upward march in global oil prices since May, manufacturers are still feeling the pinch when it comes to fuel and raw materials input costs.”

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