Construction ended 2018 with a mixed performance

The construction industry experienced a mixed quarter for sales, output and new orders in the final three months of 2018, according to a quarterly survey of the supply chain’s product manufacturers, contractors, civil engineers and SME builders by the Construction Products Association.

The survey for 2018 Q4 showed that construction products rose according to 55% of heavy side manufacturers and 21% of light side manufacturers, while 25% of SME builders reported an increase in workloads.

However, output, new orders and enquiries were reported lower by main building contractors, specialist contractors and civil engineering contractors. Rising costs for raw materials continued to filter through the supply chain – as reported by two-thirds of main contractors, 82% of heavy side product manufacturers and 74% of light side manufacturers – and, combined with lower volumes of work, continued to squeeze profit margins for building contractors.

Rebecca Larkin, senior economist at the CPA, said: “Parts of the construction supply chain have clearly started to feel the effects of the falls in new orders since the EU referendum translating into reduced activity in sectors such as high-end residential, commercial offices and industrial factories. The uncertainty that precludes investment decisions in these sectors with a high upfront outlay may also be benefiting other areas of the supply chain.

“Product manufacturers’ optimism looking towards 2019 may be reflective of continued high levels of activity in buoyant regions outside of the south east, as well as an element of precautionary stockpiling on-site providing a near-term sales uplift.”

Brian Berry, chief executive of the Federation of Master Builders, said: “Mounting Brexit uncertainty is starting to have a tangible effect and the indicators are not good with almost half of builders reporting signs of a weakening housing market. Furthermore, a worrying one in five construction SMEs has had projects stalled in the past three months due to delays to loans, or loan refusals, from the banks. Together with ever-rising costs due to material price hikes and labour shortages, the headwinds are blowing in the wrong direction for the UK construction sector.”