Construction products sales expected to slow
The UK’s £56.5 billion construction product manufacturing industry is expected to slow this year as the sector lost its pace at the end of 2017, according to the CPA’s State of Trade Survey for 2017 Q4.
The survey results showed activity is expected to weaken this year as inflation continues to rise, economic growth slows, and the UK’s post-Brexit deal still remains unclear.
It is likely the first half of 2017 was a peak for the industry, with the survey reporting early signs of slowing activity in the final three months of 2017, and construction product manufacturers envisaging a broader softening in market conditions during 2018.
The survey results showed that 6% of heavy side manufacturers, such as steel, bricks, timber and concrete, reported a decrease in product sales in Q4, compared to 10% reporting a rise in Q3. This was the first negative balance since 2013 Q1. In contrast, sales on the light side, which includes non-structural and finishing products such as insulation, boilers, glass and lighting, were still reported higher by half of manufacturing firms.
While a modest pickup in sales is anticipated in the first quarter of 2018, the survey showed a weakness in sales expectations extending across the next 12 months, for both heavy side and light side firms. No heavy side firms and only 10% of those on the light side expected an increase in product sales during 2018.
Rebecca Larkin, CPA senior economist said: “As well as weaker market conditions, it appears as though a further rise in costs will strengthen the headwinds facing industry. In Q4, 87% of heavy side firms and 91% of light side firms reported a rise in raw materials costs, while on the energy-intensive heavy side, fuel and energy costs were reported higher for 93% of firms. This illustrates the lagged pass-through of the 2016 sterling depreciation and rising global commodity prices into input cost inflation that is still to filter down the construction supply chain. Three-quarters of product manufacturers expect inflationary pressures to linger into 2018.”