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2 November 2015

Construction activity slows despite 10 quarters of growth

The latest Construction Trade Survey by the Construction Product Association (CPA) has revealed that activity in construction rose for the tenth consecutive quarter in Q3. 

Growth was reported by firms across all areas of the industry, from building contractors and SME builders, to civil engineers and product manufacturers.

Economics director, Dr Noble Francis, said: “Firms across the whole construction supply chain reported rises in output during Q3. Although activity appears to have slowed down, SMEs, civil engineering firms and product manufacturers remain optimistic about the near-term outlook. On the downside, building contractors reported an across-the-board decrease in new orders during the quarter, particularly in the public housing sector.”

He continued: “A downturn in public housing work is was expected, given the proposed changes to housing benefit, Right to Buy and social rent cuts in the July Budget. Of more concern is the fall in new orders in private housing and commercial, which have driven the construction recovery over the last two years.

“However, not all the news is discouraging. SMEs reported an increase in enquiries, civil engineers reported an increase in Q3 orders and product manufacturers anticipated workloads rising over the next 12 months.  Increased headcount among construction firms also signals expectations of further growth in activity.”

Dr Francis concluded: “Although the overall outlook is largely optimistic, the impact of a shortage of skilled labour continued to manifest itself, not just in difficulties recruiting bricklayers and other on-site trades, but in rising wage bills. In Q3, labour costs were higher for 75% of building contractors, 93% of product manufacturers and 44% of SMEs. Increasing activity over the next year threatens to make these labour supply issues even more acute.”

Chief executive of the National Federation of Builders, Richard Beresford, said: “The construction industry’s broad-based recovery should not lull us into ignoring certain concerns. Government policy uncertainty on renewables, the cancelling of the Green Deal and the disposal of housing association stock will leave a vacuum in the repair and maintenance market. Difficulty in recruiting certain skills are driving up costs and the proposals on apprenticeship funding will only make it harder to invest in the very skills the industry needs.”

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