Aug 17 2005
Overall construction output continued to rise during the second quarter, but the pace of growth was weak and critically dependent upon increased Government investment, according to the Construction Industry Trade Surveys published by the Construction Confederation and the Construction Products Association.
Commenting on the findings, Michael Ankers, Chief Executive of the Construction Products Association said: “The construction industry is facing difficult trading conditions as a result of a weakening in private sector activity, especially in consumer and housing market related areas. The survey results underline the importance of public sector investment for both the construction industry and the wider economy. “Manufacturers continue to battle rising unit costs driven by higher raw material and fuel costs, with around half of firms seeing their unit costs rise by over 5%. Despite increased capital investment and productivity gains, these cost pressures are feeding through to manufacturers’ selling prices.”
Speaking on behalf of contractors, Stephen Ratcliffe, Chief Executive of the Construction Confederation said: “Once again public sector worked has helped to sustain growth in the building sector. However, despite expectations that this trend will continue over the next 12 months, there is evidence that the industry is becoming increasingly cautious about prospects. It is also clear that contractors are experiencing increased pressure on margins from rising material and labour costs and a weakening in tender price inflation.
“While contractors remain concerned about the recruitment of skilled site labour, firms have reported an across the board improvement in the availability of specific trades. This improvement in availability is consistent with the slowing in construction growth. In particular the drop in private housing activity appears to have contributed to the improved availability of related trades such as bricklayers, plumbers, plasterers and carpenters.”
Key survey findings are:
- Building contractors reported modest growth during the second quarter with on balance 22% of contractors reporting increased output volumes on a year ago.
- Overall construction product manufacturers reported a modest rise in sales volumes, with strong growth in light side sales offsetting weakness on the heavy side of the industry.
- Higher government investment lifted public sector building work and repair & maintenance work, offsetting a marked weakening in new housing and commercial work.
- A lack of road investment activity held back heavy side manufacturers’ sales volumes, with firms on balance reporting first quarter sales were little on a year ago. Civil engineering contractors reported a slight fall in workload against a year ago, partly due to a marked decline in motorway and trunk road work.
- Overall, industry expectations are becoming increasing cautious.
On balance 49% of surveyed contractors expect to increase their output over the coming twelve months compared to 66% during the first quarter. On balance only a third of manufacturers expected to increase their sales over the coming 12 months compared to 59% in the previous survey.
- Both heavy and light side manufacturers have seen widespread increases in raw material and energy costs, Almost half of manufacturers report that their unit costs have risen by over 5% during the last year and 38% of manufacturers have had to increase their domestic selling prices by over 5%.
- Around 85% of contractors report that material prices and site labour costs have risen over the last 12 months. Although contractors remain concerned about the recruitment of skilled site labour, firms reported an across the board improvement in the availability of specific trades.
- Product manufacturers have on balance increased their investment over the last year. Manufacturers are planning to further raise their capital expenditure over the next 12 months. Plant & equipment and product improvement are among the priority areas for targeted increased investment, with on balance 38% and 56% of firms respectively planning to invest more.