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[February 2007]
Strong Construction Finish to 2006 Raises Expectations
The UK construction industry finished 2006 on a positive note and expectations are high for sustained growth during 2007, according to the latest joint Trade Survey Report from the Construction Products Association (CPA) and the Construction Confederation. However, high fuel and energy prices continue to hamper the industry's overall performance, squeezing both product manufacturers' and contractors' margins and driving up tender prices.The rise in output continues to be driven by robust commercial and industrial sector output combined with a modest rise in civil engineering work. Disappointingly though, the patchy delivery of key government programmes prevented even stronger industry growth during the final quarter of last year, says the CPA. Construction product manufacturers have enjoyed an overall rise in sales volumes, with growth continuing to be led by light side firms. Heavy side firms' sales have also improved, as companies are starting to benefit from an increase in civil engineering work.
Looking ahead the industry is expecting a further strengthening in construction activity during 2007, marked by stronger growth in orders and rising demand. A modest pick-up in public sector investment is expected to contribute to the rise, but higher private sector activity, in particular a strong commercial sector, will again be the main engine for industry growth. In addition, the pick-up anticipated for heavy materials demand is based on hopes of a recovery in infrastructure investment.
Speaking about the latest report, Máren Baldauf, Economist of the Construction Products Association, said: "Construction activity continued to pick up during the fourth quarter thanks to higher commercial and industrial sector output and an improvement in civil engineering work. Strength in these areas helped offset a mixed performance in Government funded areas. Unfortunately the overall positive outlook for product manufacturers is being tempered by continuing increases in fuel and energy costs, which are squeezing product manufacturers' margins and is filtering through the supply chain as higher material prices".
Stephen Ratcliffe, Chief Executive of the Construction Confederation said: "The positive end to the year was very welcome but the robust activity in the commercial and industrial sectors masks the rather mixed delivery of government programmes. Sustained public sector spending is key to delivering the planned programme of improvements in health, education and transport infrastructure as well as ensuring the confidence necessary for our industry to maintain its own investment in recruitment, training and long-term planning. It is important that the public sector maintains a continuous programme and does not revert to a stop-go approach".
www.constprod.org.uk
ENDS