Construction products manufacturing in the UK grew for the 15th consecutive quarter in the last quarter of 2016, according to the latest Construction Products Association (CPA) state of trade survey.
UK construction products manufacturers achieved a turnover of £55 billion (€63 billion) in 2016, directly providing jobs for 288,000 people across 22,000 companies.
Products ranged from heavy side materials such as steel, bricks, timber and concrete to light side products such as insulation, boilers, glass and lighting. On an annual basis, 78% of heavy side firms and 75% of light side firms reported sales had increased in the fourth quarter.
However, the CPA warned manufacturers to expect weaker sales growth during the first quarter of 2017 suggesting that uncertainties over the UK government triggering Article 50 to leave the EU had diminished confidence. Only 6% of heavy side manufacturers anticipate an increase in sales over the next quarter, while a balance of 29% was recorded on the light side.
Rebecca Larkin, CPA senior economist, said, “Unsurprisingly, manufacturers’ expectations for 2017 appear to have been tempered by the uncertainty surrounding the economic and political outlook.
“Heavy side manufacturers appeared most exposed to the effects of Sterling’s depreciation during the second half of 2016.”
She added, “In the fourth quarter, two-thirds of firms reported an increase in costs, the highest in five years, and 89% anticipate an increase over the next year. Rising costs of imported raw materials continue to be a primary driver of cost inflation, but there is now an indication that currency weakness is filtering through to higher energy and fuel costs too.”
She cautioned that the impact of Brexit (the UK’s decision to leave the EU) on the construction industry remained unclear, “but it is unlikely this year will be as buoyant as last, unless government is able to provide greater certainty and the industry is able to manage cost pressures”.
Almost a third (29%) of heavy side manufacturers reported higher exports in the fourth quarter compared with a year earlier, while this was only 8% in the third quarter. In the fourth quarter, half of light side manufacturers reported an increase in export sales compared with a year earlier, compared to 17% in the third quarter.
A third of heavy side and half of light side manufacturers expected a rise in exports over the next 12 months, supported by the recent Sterling depreciation.