Construction product manufacturing rises but investment stalls
The construction products manufacturing sector reported favourable results in the first quarter of 2019, with continued growth in the sales of products and materials; despite the environment of uncertainty relating to Brexit, manufacturers’ sales expectations for the next 12 months remained optimistic.
The Construction Products Association’s State of Trade Survey for 2019 Q1 has revealed a balance of 46% of both heavy side and light side manufacturers experienced a rise in sales during the quarter. Growth in product manufacturers’ output is anticipated to rise further in the coming months, with 33% of heavy side firms and half of those on the light side expecting an increase in sales in Q2.
A lack of clarity over the political and economic situation may be holding back product manufacturers’ capital investment, however. Only 8% of heavy side firms, on balance, reported an annual increase in investment in structures and 17% reported investment in plant and equipment was higher than a year ago. This compares to five-year average balances of 21% and 54%, respectively.
Rebecca Larkin, CPA senior economist, said: “Recent construction data has painted a mixed picture of the demand for manufacturers’ output, particularly in sectors where confidence has been hit by Brexit-related uncertainty such as commercial offices, industrial factories and high-end residential. Contrast this with almost half of product manufacturers reporting increased sales in Q1, and the anecdotes of on-site stockpiling further down the supply chain seem to be ringing true.
“Although the uncertain climate may be helping manufacturers’ sales, the negative impact has been on the sector’s capital investment. Heavy side firms have reported a noticeable slowing in investment in new buildings and plant, and investment intentions for the next year remain equally muted. With the risk of a no-deal Brexit and its damaging effect on construction activity still present, clarity is urgently required.”