Bad weather and the collapse of contractor Carillion have been blamed for a weak start to 2018 for the UK’s construction products manufacturing industry.
The UK’s Construction Products Association’s (CPA) State of Trade Survey was looking at the £56 billion (€64 billion) UK construction products manufacturing industry’s first quarter of 2018, saying that the period combined the liquidation of Carillion as well as several days of disrupted activity due to snow and freezing temperatures.
It found that heavy side manufacturers recorded the lowest balance in five years, with 15% of firms reporting a decline in sales in the first quarter, following a previous quarter of falling sales in the final quarter of 2017.
For light side manufacturers, no firms on balance reported either an increase or a decrease, which was the weakest performance since the second quarter of 2013.
The CPA said that construction product sales acted as an early indicator of wider construction activity and that these results signalled a noticeable dip in total industry output for the first quarter.
Return to growth
It said that manufacturers expected a return to growth in the coming quarters, but rising costs continued to act as a headwind. It found that 90% of heavy side manufacturers and 84% of those on the light side reported a rise in raw materials costs in the first quarter, while the same proportions reported an increase in wages and salaries. In addition, fuel costs rose for 90% of heavy side manufacturers.
Rebecca Larkin, CPA senior economist, said, “It was always unlikely that heavy side manufacturers would avoid the snow disruption, with aggregates quarries unable to operate, and pauses in activities such as groundworks and bricklaying affecting demand for products and materials from construction sites.
“In addition, manufacturing capacity in this energy-intensive sector of the industry is likely to have been temporarily reduced by the National Grid’s gas deficit warning at the beginning of March.”
She said that it appeared from the forward-looking indicators that the first quarter was just a weather-related blip, as 42% of heavy side manufacturers expected sales to rise in the second quarter, and 37% saw sales rising over the next 12 months.
“However,” she said, “no light side manufacturers expect sales to increase in the next quarter and only 16% anticipate a rise over the course of the year, likely to reflect the lagged impact of any pauses in activity in the first quarter on demand for these non-structural and finishing products that tend to be used nearer the end of the building process.”