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[November 2007]
UK Construction Remains Strong Despite Concerns Over Economic Prospects
The UK construction industry grew firmly during the third quarter of 2007 and remains confident for the year ahead despite heightened uncertainty over the UK’s economic prospects, according to the latest joint Trade Survey Report from the Construction Products Association and the Construction Confederation.
Construction products sales increased again during the third quarter, with 57% of firms on balance reporting higher sales than a year ago. A third of light side firms reported that their sales volumes had increased by more than 5% compared to last year; the increase in heavy side sale volumes was more modest.
Strong activity in the public new housing sector and a rebound in repair and maintenance activity were the principal drivers for the further strong rise in overall workload for Building Contractors. In addition, civil engineering contractors reported a further strong upwards trend in their workload, with current growth driven by strong activity in railway infrastructure, water and sewerage works, and site works for building developments. Disappointingly, however, roads related works remains weak.
The overall rise in construction output during the third quarter was accompanied by a general increase in site labour recruitment difficulties. More than 25% of building contractors reported that recruitment difficulties had prompted them to turn down work during the quarter. There was also a marked increase in firms reporting that labour shortages had contributed to the late delivery of work.
Commenting on the survey, Máren Baldauf, Economist at the Construction Products Association, said: “This latest survey shows that light side manufacturers in particular continue to benefit from strong sales growth, due to an increased demand for insulation and the government’s investment to improve the existing social housing stock. Heavy side sales were ahead on the same period last year, though the pace of growth has moderated, reflecting the continued weakness of road investment and an easing in key new build sectors. Whilst product manufacturers’ capacity utilisation edged up during the third quarter, the vast majority of firms report that available capacity is not expected to constrain output growth. However, manufacturers continue to face upward pressure on their unit costs. This maintains the pressure on their margins and as a consequence raises manufacturers’ selling prices.”
Stephen Ratcliffe, Chief Executive of the Construction Confederation said: “Contractors remain positive about short-term and longer-term prospects although margins are being squeezed, due to both an increase in material prices and higher labour costs. This is despite a rise in tender prices. Strong activity in the public new housing sector and a rebound in repair and maintenance activity are the principal drivers for construction growth, with building firms across all sizes benefiting from the increase in workload.
“It is good to see civil engineering contractors reporting a further strong increase in workload and employment. Continuing weakness in roads related work is clearly being offset by strong activity in railway infrastructure, water and sewerage works, and site works.”
www.constructionproducts.org.uk
ENDS