CPA Trade Survey reports mixed third quarter for firms in the construction supply chain

At a headline level, it was a mixed third quarter for firms in the construction supply chain.

Construction product manufacturers reported a second quarter of growth in sales volumes, although for the heavy side, sales remained lower than a year earlier. Civil engineering contractors reported an increase in workloads, marking the sixteenth quarter of growth. The strength in infrastructure has been echoed by chartered surveyors throughout this period and in Q3, was the primary driver of their workloads growth. Surveyors also reported very early signs of a recovery in private housing, commercial and public non-housing workloads, although public housing remained a sector in decline. It was a difficult quarter for SME contractors, however, with a fall in workloads reported across all sectors of operation: new build housing, repair, maintenance and improvement (RM&I) and industrial/commercial. A fall in enquiries across all three sectors was also reported, suggesting that the recovery in construction will materialise slightly later into 2025 than previously expected. Further interest rate cuts are widely expected next year, underpinning hopes that the pickup in mortgage lending since Summer will continue into the key Spring selling season and support house builder confidence, as well as drive an increase in property transactions for existing homes that then lead to improvements work. Consumer confidence will be key, however. With no direct impact on personal finances or taxation in the Budget in October, measures of consumer confidence showed some improvement towards the end of 2024. in contrast, the Chancellor’s increase in employers’ National Insurance Contributions and increase in the National Living Wage, both coming into force in April, have been flagged as a significant cost pressure for businesses. A broad base of cost pressures was already reported in Q3, led by wages and salaries for manufacturers, raw materials for SME contractors and 40% of civil engineering contractors reported annual cost increases of more than 5%. The extent of passthrough into client and end user costs is a clear risk to the speed of the construction recovery, whilst the impact on other sectors of the economy such as retail may lead to a fresh deterioration in consumer and household confidence and spending.