Rising cost pressures

Firms across the construction industry are bracing themselves for further cost pressures after reporting a rise in raw material prices despite growth across the industry during 2016 Q4. 

An increase in sales, output and workloads were all reported during the quarter but forward-looking indicators suggest the outlook for building activity during 2017 has worsened.

The Construction Products Association’s Construction Trade Survey Q4 showed that overall costs increased for 88% of civil engineering contractors, whilst 75% of main contractors, 78% of heavy side manufacturers and 88% of light side manufacturers also reported a rise in raw materials costs. 

The latest statistics also highlighted a skills shortage affecting key on-site trades with main contractors reporting shortages of carpenters and plasterers at their highest in nine years. 

Rebecca Larkin, senior economist at the CPA, said: “The construction industry closed 2016 on a strong note, with activity improving for firms throughout the supply chain. However, order books and enquiries were lower for contractors, and signal a weaker outlook for 2017. 

“Cost pressures continued to rise, particularly for imported raw materials, and compound the risks that activity will be unable to grow at current rates over the next 12 months. The construction products manufacturing industry is responsible for directly employing 280,000 people and while government has a role to play in providing certainty for projects, industry will need to find ways to navigate rising costs.” 

Richard Beresford, chief executive of the National Federation of Builders said: “The decrease in both public and private housing is a call to the government to be bold in its housing aspirations. When Theresa May came to office, she promised to deliver an economy that works for everyone. If we cannot provide people with the most basic requirement such as a roof over their head, then the Housing White Paper will have failed.”