UK construction product sales have climbed for the 14th quarter in a row.
Q4 2016 continued the positive trend for the industry, according to the CPA’s latest State of Trade Survey.
The construction products manufacturing industry includes ‘heavy side’ materials such as steel as well as light-side products including fasteners and ironmongery. 78% of heavy-side firm reported sales were up in Q4, while 75% of light-side firms reported sales were higher than a year earlier.
29% of light-side manufacturers anticipate a rise in sales in Q1 2017 compared with only 6% of heavy-side firms. Cost pressures following the post-Referendum Sterling fall have hit expectations for the industry.
The construction products manufacturing industry has an annual turnover of £55 billion, providing jobs for 288,000 across 22,000 companies, according to the CPA.
“The impact of Brexit on the construction industry is, as yet, unclear”
Rebecca Larkin, CPA Senior Economist said: “Construction product manufacturers ended 2016 on a strong note. Half of manufacturers on both the heavy and light side reporting an increase in sales in Q4, marking not only a fifteenth consecutive quarter of growth, but also the highest balances for the year.
“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. In Q4, two-thirds of firms reported an increase in costs, the highest in five years, and a further 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.
“The impact of Brexit on the construction industry is, as yet, 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.”
Here’s a summary of some of the findings:
- On an annual basis, sales rose for 78% of heavy side firms and 75% of firms on the light side, on balance
- A balance of 50% of heavy and light-side firms reported that construction product sales rose in the fourth quarter of 2016 compared with Q3
- On balance, 6% of heavy-side manufacturers anticipated a rise in sales in 2017 Q1, worsening from a balance of 45% in Q3
- On the light side, 29% of firms expected an increase in product sales in the next quarter, compared to a balance of 67% in Q3
- Annual cost increases were reported by 78% of heavy side manufacturers and 71% of those on the light side.
- Raw materials costs rose according to 78% of heavy-side manufacturers and 88% of those on the light-side
- Fuel and energy costs rose for 71% and 61% of heavy side manufacturers respectively.