Construction
products manufacturing returned to business as usual in Q3 after the
weather-related pauses and subsequent catch-up in the first half of the year.
Britain’s £56
billion industry is cautiously optimistic that the year will finish strong with
sales anticipated to pick-up in Q4.
The Construction
Products Association’s latest State of Trade Survey reveals that product
sales, which act as an early indicator of wider activity in the UK construction
supply chain, increased in 2018 Q3.
For heavy side
manufacturers, 27% reported that sales increased, which was below the 40% that
reported a rise in sales in a weather-boosted Q2, but in line with the average
survey balance for 2017. On the light side, which includes products such as
insulation, boilers, glass and lighting, 27% of manufacturers also reported
that sales rose, marking the first increase of 2018.
Manufacturers
anticipate growth continuing in Q4, with 18% of heavy side firms and 43% of
those on the light side expecting an increase in sales during the quarter.
Manufacturers also reported that labour cost pressures began to subside in Q3.
Two-thirds of heavy side firms reported an increase in wages and salaries, but
this was the lowest balance since 2013 Q4. In contrast, cost inflation for fuel
and raw materials remained elevated.
Rebecca Larkin, CPA
Senior Economist said: “Given the unprecedented levels of economic uncertainty
around Brexit and the weather-related distortions in the first half of the
year, signs of a steady expansion in Q3 for construction product manufacturing
and the building activity it delivers into are reassuring. Manufacturers remain
cautiously optimistic and expect sales to increase in the fourth quarter, but
it will be the political developments in Q4 that are crucial in setting the
backdrop for this to become a reality.
“Cost pressures
appear to have started easing on the labour side, but with continued weakness
in Sterling and the upward march in global oil prices since May, manufacturers
are still feeling the pinch when it comes to fuel and raw materials input
costs.”
Key survey findings
include:
- A balance of 27% of heavy
side firms and 27% if light side firms reported that construction product
sales rose in the third quarter of 2018 compared with the second quarter.
- On an annual basis, sales
also increased for 27% of heavy side and light side firms
- On balance, 18% of heavy side
manufacturers anticipated a rise in sales in the next quarter, decreasing
from a balance of 50% in the previous quarter
- On the light side, 43% of
firms expected an increase in product sales in Q4, compared to a zero
balance in Q1 and Q2
- Overall annual cost increases
were reported by 64% of manufacturers on the heavy side and 50% on the
light side
- Raw materials costs rose
according to 82% of heavy side manufacturers and 71% of those on the light
side
- Fuel costs were reported
higher by 90% of heavy side and light side firms.
