UK activity up again

10 February 2014

A rise in UK construction activity in the fourth quarter marks the first time in more than five years that there has been three consecutive quarters of growth in Construction Products Association figures.

The association’s latest Construction Trade Survey found that UK firms across all areas reported increased output. This included building contractors, SMEs, specialist contractors, civil engineers and product manufacturers.

Dr Noble Francis, economics director at the Construction Products Association, said, “The recovery, which started in the second quarter of 2013, continued, though risks remain.

“The rises in activity were slower than in previous quarters, and orders for new work similarly decelerated, potentially highlighting uncertainty among contractors as to whether the recovery would be sustained.”

He said growth had been driven by the housing sector, though this had been partially offset by a drop in repair and maintenance work.

Building contractors, SMEs and civil engineers reported rises in output, he said, although fourth quarter levels were not as strong as third quarter. Only product manufacturers were found to have activity levels higher in the fourth quarter than the third.

He said, “Tender prices rose again this last quarter, especially for building contractors and civil engineers. These rises, however, were mitigated by growth in cost inflation, largely owing to increased labour, energy and transport costs. As a result, most contractors reported a fall in profit margins despite the improving demand over the past 12 months.”

He added that 41% of building contractors had reported difficulties recruiting bricklayers with 32% reporting problems finding carpenters.

Stephen Ratcliffe, director of UKCG (UK Contractors Group), said, “While contractors reported a slowdown in output growth this quarter, the trend over the last year remains one of modest recovery.

“Unlike housing, the broader construction sector remains a lagging indicator and we would expect the main growth to come later than the wider economy.”

He added that rising labour costs highlighted the need to tackle skills shortages as the move towards recovery continued, as well as for “a clear pipeline of future work so firms have the certainty to invest in apprenticeships and other long-term training programmes”.

Julia Evans, chief executive of the National Federation of Builders, said, “These figures highlight the fragility of the construction industry’s recovery, which is being driven by house building.

“Ongoing investment and future prospects point to further growth for the construction industry as a whole, but as the economy recovers, it is important for companies to be at least as vigilant about costs, cash flow and late payment as they were during the downturn,” she said.

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