FMJ Facilities Management magazine providing industry-specific intelligence to FM and property professionals
The two-year run of sales growth for construction product manufacturers came to an end in Q3, according to the Construction Products Association’s latest State of Trade Survey.
Furthermore, a slowdown in construction activity in the publicly financed and repair & maintenance sectors since Summer, as well as the deteriorating economic backdrop, underpin manufacturers’ expectations of a contraction for the year ahead.
In Q3, 12 per cent of heavy side manufacturers reported that sales of construction products declined, marking the first fall since the nationwide lockdowns in 2020 Q2. Alongside this, 17 per cent of light side manufacturers reported that product sales rose, which marked the lowest balance in two years.
In the Q3 survey, demand was viewed as the key constraint on manufacturers’ activity going forward. On balance, 53 per cent of heavy side firms, whose products tend to feed into the earlier stages of construction, anticipated a decrease in sales over the next 12 months. On the light side, a balance of 13 per cent of firms anticipated a decline, marking the first negative view since the height of Covid-19 disruption in 2020.
Rebecca Larkin, CPA Senior Economist said: “The easing in manufacturers’ sales and the emerging weakness in construction output in Q3 is now joined by broader deterioration in the UK economy. High inflation continues to erode household finances and take big chunks out of project budgets, at a time when markets have reacted badly to the new Chancellor’s early fiscal plans and knocked confidence and growth prospects even further.”
She added: “With a recession on the cards for 2023, it should come as no surprise that construction product manufacturers are anticipating a contraction in sales and activity. This combines with the strong rates of input cost inflation that already pervade the supply chain and have begun to delay decision-making on construction projects. Hopefully some of the unanswered questions around the government’s spending plans will be resolved in the coming months and help to lift the cloud of uncertainty hanging over our industry.”
Other key survey findings include:
- Fuel costs rose for all heavy side and light side manufacturers; energy costs rose for 94 per cent of heavy side firms and 96 per cent of light side firms
- Overall costs are expected to increase over the next year according to balances of 82 per cent on the heavy side and 61 per cent on the light side
- Weakness in hiring intentions was reported by both heavy side and light side manufacturers
Overall, the Q3 survey demonstrates the impact of existing inflationary pressures combining with early signs of a deterioration in the economic situation, leading to a decline in construction product manufacturers’ sales and forward-looking expectations.
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