CPA: construction industry to grow in 2008 according to latest survey
The construction industry ended 2007 on a positive note with modest growth set to continue during 2008, according to the latest joint Trade Survey Report from the Construction Products Association and the Construction Confederation.
Although both product manufacturers and contractors report that activity growth slowed during the final quarter of last year, output and sales volumes remained solidly up compared to the same period a year earlier.
Contractors reported a further rise in output during the fourth quarter of 2007. The pace of growth weakened markedly during the quarter compared to the previous three months yet still produced a record year-on-year rise in output growth. The dip in output combined with weaker new orders and enquiries, would suggest that higher interest rates and the tougher credit conditions are affecting both consumers’ and investors’ sentiment, dampening the flow of new work in private sectors. The past tightening of the labour market, which pushed up labour costs significantly, appears to have been eased by slower industry growth during the fourth quarter.
Overall, construction products sales slowed during the fourth quarter compared to the previous three months, with weaker heavy side sales offsetting a rise in light side sales. Nevertheless, sales volumes remained firmly higher than levels seen in 2007. Manufacturers of construction products continue to report widespread increases in unit costs, driven by higher energy and raw material prices. This means the profit margin of manufacturers is being squeezed, as input price increases continue to outpace the rise in selling prices. However, most product manufacturers identified demand level as the greatest potential constraint upon sales in 2008, as capacity utilisation eased during the fourth quarter.
Noble Francis, Economics Policy Development Director at the Construction Products Association said: “There is concern over output and sales growth in the first quarter of this year. However, expectations for 2008 as a whole remain buoyant. Whilst there is an absence of firm order books and new enquiries and a more subdued outlook for the UK economy, the industry is optimistic. During the next twelve months firms expect to see orders from 2007 feeding through into actual work, focusing particularly on public sector activity in health, education and infrastructure.”
Stephen Ratcliffe, Chief Executive of the Construction Confederation added: “”Despite the slowing in the rate of growth, there is a strong indication that the sector is still fairly robust. Contractors retain a healthy amount of optimism and we have to make sure that we don’t talk ourselves into a recession when the evidence shows the industry remains busy and buyoant.”
Key survey findings are:
. Despite expectations of a marked slowdown in overall industry activity this year, product manufacturers remain optimistic in the short-term, with the majority of those surveyed anticipating higher sales volumes over the coming year.
. Contractors report that Q4 output was higher than one year ago, with more than half of firms reporting that output rose relative to the same period a year ago.
. However, contractors report that the outlook, in terms of their order books, is mixed. Public new housing and commercial contractors regard their order books as ‘above normal’. However, this contrasts with industrial and public non-housing sectors, where 27% and 22% of contractors describe work as ‘below normal’.
. Construction product manufacturer costs rose during the fourth quarter of 2007, with 90% of firms reporting increases over the last year. 44% of heavy side firms report that their costs rose by ‘more than 5%’. However, the increases in costs is relatively modest for light side firms, two thirds of whom report that their unit costs have increased by ‘less than 5%’.
. Cost rises occurred mainly as a result of higher fuel and energy costs. 75% of heavy side firms and 63% of light side firms report that higher energy costs had added to production costs.
. However, costs also rose as a result of rises in raw materials prices. 69% of all firms reported that raw material price increases also led to rises in the cost of production.
. Building contractors’ capacity utilisation remains at high levels but pressures are easing. Two thirds of contractors stated that they were operating at 90% or higher in terms of capacity, slightly lower than in the previous quarter.
. Capital investment rose during 2007, with around half of heavy and light side firms investing in more plant and equipment to improve productivity. However, investment intentions are more muted for the year ahead with a balance of 15% of heavy side firms planning to decrease investment in structure and only 31% of heavy side firms
. Civil Engineering contractors reported a further rise in total civil engineering workload, increased employment and order books fuller than a year ago. However, contractors do not appear to be as confident that these trends will continue over the next 12 months, although there are positive findings for work in the roads sub-sector.
ENDS
NOTE TO EDITORS:
CONSTRUCTION PRODUCTS ASSOCIATION:
The Construction Products Association represents the UK’s manufacturers and suppliers of construction products, components and fittings. The Association acts as a single voice for the construction products sector, representing the industry-wide view of its members. The sector has an annual turnover of £40 billion and accounts for 40% of total construction output.
The Construction Products Association undertakes a comprehensive quarterly survey of its members operating across this sector.
CONSTRUCTION CONFEDERATION:
The Construction Confederation is the main representative organisation for building and civil engineering contractors within the UK construction industry, one of the largest and most diverse sectors within the British economy.
The Construction Confederation survey results are taken from the Confederation’s 5,000 member companies, which are responsible for more than 75% of construction work in Great Britain. The results are weighted according to the turnover of each participating firm.
FOR FURTHER INFORMATION CONTACT:
Noble Francis, Economics Policy Development Director
Construction Products Association
Tel : 020 7323 3770
Fax : 020 7323 0307
E-mail : noble.francis@constructionproducts.org.uk
Kirsty Ivanoski, External Affairs Manager
Construction Products Association
Tel: 020 7323 3770
Fax: 020 7323 0307
E-mail: kirsty.ivanoski@constructionproducts.org.uk
Kurt Calder, Communications Director
Construction Confederation
Tel: 020 7227 4508
Fax: 020 7227 4510
E-mail: kurt.calder@theCC.org.uk
FOR COPIES OF THE CONSTRUCTION INDUSTRY TRADE SURVEYS, CONTACT:
Noble Francis, Economics Policy Development Director
Construction Products Association
Tel: 020 7323 3770
Email: noble.francis@constructionproducts.org.uk
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