Jul 5 2007
Rising UK construction product sales during the second quarter signal a quickening in construction growth, according to the Ernst and Young/Construction Products Association Activity Barometer, published at the end of June.
The second quarter of 2007 records a score of 80 compared to a score of 74 in the first quarter, significantly above the 50 ‘no change’ mark. Yet again product sales volumes have set a new highest level since the survey started in 2005.
Commenting on the results, Allan Wilén, Economics Director for the Construction Products Association said: “The Barometer findings indicate that the pick-up in construction output is becoming more widely based, with a high proportion of both heavy and light side firms now indicating that sales volumes are ahead of a year ago.
“The acceleration in heavy side sales is especially notable. Over the last two years heavy side sales growth has been hampered by a weak infrastructure sector and the trend towards building smaller homes and apartments. This reading of 77 for the second quarter is a marked improvement, with expectations also high for the coming three months as firms benefit from strong non-residential activity. Firms also report that there has finally been a modest pick-up in water industry capital expenditure, although other key areas of infrastructure work – in particular roads – remain weak.
“Light side firms are still the most optimistic, although the 96 score seen in the previous quarter is down to 85. This index reading is still indicative of a positive market, though firms report that margins remain under pressure. Light side manufacturers expect a further moderation in growth during the third quarter, with an index reading of 78.
“Overall the industry as a whole anticipates a steady increase during the third quarter of 2007. This confirms the Construction Products Association’s assessment in its recent Forecast that construction industry growth will strengthen to 3.1% this year.”
Dominic McAra, a Director in Ernst & Young’s Building Products team
commented: “It is encouraging to see the continued optimism in 2007 across both light side and heavy side. This is particularly good news for the heavy side sector after the tougher trading conditions in 2006.
“Our clients are telling us that they are still seeing the UK as an attractive market – and are anticipating both organic growth and growth by acquisition. This is underlined by the number of construction products related transactions recently, with investment coming into the sector from a number of overseas players.”