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8 February 2017

Rising cost pressures could hamper construction industry growth

The Construction Products Association (CPA) has revealed the results of its Construction Trade Survey for the final quarter of 2016.

The findings are results of surveys by Build UK, the Civil Engineering Contractors Association, Construction Products Association, Federation of Master Builders and National Federation of Builders.

Companies across the construction industry are preparing themselves for further cost pressures after reporting a rise in raw material prices despite growth across the industry during 2016 Q4.

An increase in sales, output and workloads were all reported during the three-month period but forward-looking indicators suggest the outlook for building activity during 2017 has worsened. The CPA’s Construction Trade Survey Q4 showed that overall costs increased for 88% of civil engineering contractors, whilst 75% of main contractors, 78% of heavy side manufacturers and 88% of light side manufacturers also reported a rise in raw materials costs.

In addition, these latest statistics highlighted a skills shortage affecting key on-site trades, with main contractors reporting shortages of carpenters and plasterers at their highest in nine years.

CPA senior economist Rebecca Larkin said: “The construction industry closed 2016 on a strong note, with activity improving for firms throughout the supply chain. However, order books and enquiries were lower for contractors and signal a weaker outlook for 2017.

She continued: “Cost pressures continued to rise, particularly for imported raw materials, and compound the risks that activity will be unable to grow at current rates over the next 12 months. The construction products manufacturing industry is responsible for directly employing 280,000 people and whilst government has a role to play in providing certainty for projects, industry will need to find ways to navigate rising costs.”

Meanwhile, Richard Beresford, chief executive of the National Federation of Builders, said: “The decrease in both public and private housing is a call to the Government to be bold in its housing aspirations. When Theresa May came to office, she promised to deliver an economy that works for everyone. If we cannot provide people with the most basic requirement such as a roof over their head, then the Housing White Paper will have failed.”

Chief executive of the Federation of Master Builders, Brian Berry, added: “Rising material prices and growing skills shortages dampened growth among construction SMEs in the final three months of last year. The optimism that we saw from small construction firms during most of 2016 has now dropped off because of growing concerns about rising costs. The pledge from the Government that it will focus on finding ways to boost smaller scale house builders is therefore timely as it’s an area that is ripe for growth and could help counteract the risk of stagnation within the SME part of the construction industry.”

 

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