All parts of the construction supply chain experienced continued growth in Q3, according to the Construction Trade Survey.

Construction product manufacturers reported a fifth consecutive quarterly rise in product sales, whilst SME building contractors and chartered surveyors registered another increase in workloads. However, given ongoing issues on the supply side and the subsequent impact on cost inflation, all balances came in lower than in Q2. Nevertheless, growth remained widespread across sectors and continued to be steered by private housing and RM&I due to strong demand for larger properties with outdoor and office/study space to accommodate homeworking.

The CPA’s Construction Trade Survey brings together results from surveys of building contractors, specialist contractors, civil contractors and product manufacturers. It provides a pan-industry assessment of current and expected conditions. FIS members can download the full report here.

The Construction Products Association (CPA) has revised construction output growth up for 2021 from 13.7% to 14.3% since its previous forecasts, but also revised down growth for 2022 from 6.3% to 4.8% in 2022. With more buoyant demand so far in 2021, supply chain constraints are expected to hinder growth over the remainder of the year and into 2022. There is real doubt as to whether there is sufficient capacity in the whole construction supply chain to enable demand. Skills shortages, product availability and cost inflation, HGV driver shortages, the impacts of energy cost rises, and delays at ports are all expected to make up an unprecedented number of constraints on growth for the months ahead.

The CPA’s Autumn Forecasts show the infrastructure sector to be the key driver of construction growth for the year ahead. Less affected by supply-side issues than other areas of construction, the main activity in the sector is due to work on five-year spending plans within the regulated sectors of rail, water, roads and energy. Growth above general activity levels will be driven by major projects such as the Thames Tideway Tunnel, Hinkley Point C and HS2. Infrastructure output is forecast to rise by 23.9% in 2021 and by 9.7% in 2022 as the sector reaches record levels due to main works on HS2.

Output in private housing, the largest construction sector, is forecast to rise by 17.0% in 2021 and by 6.0% in 2022 with house builders confident regarding demand at the end of this year and in the first half of 2022. However, the private housing forecast for next year is a downward revision from 8.0% forecast in the Summer to reflect concerns about affordability and the sustainability of double-digit house price growth, particularly in the light of rising inflation concerns and the impact on consumer confidence and spending in the second half of 2022.

In the private housing rm&i sector, the ‘race for space’ continues unabated. Output here is forecast to rise by 20.0% this year but remain flat, at a historically high level, in 2022. According to the Bank of England, households have accumulated £200 billion of savings over the past 18 months since the initial lockdown began. Most small contractors have renovation projects lined up for the next six months, but the capacity of small contractors is already being tested from skills and products shortages. In addition, the impacts of rising costs over the next six months across the economy may lead to more subdued consumer confidence and spending on renovation projects later next year.

In the commercial sector, activity on the fit-out and finishing of new and existing offices, retail and leisure buildings, plus changes in use of existing commercial developments into residential and warehouses, remains strong. Again, however, firms in these areas report that skills shortages remain key constraints. While demand for new high-profile, grade A office space appears to be robust as corporate clients move into new, quality office space aimed at fewer employees and increased space per worker, new investment is lacking in mid-range office space and in retail. There remain relatively few new office towers projects in the pipeline owing to an excess supply of floor space in urban centres given only a partial return to offices. Existing retail space demand remains lower than pre-Covid-19 despite retail sales having recovered to pre-pandemic levels. The issue being the long-term shift away from in-store retail and towards online shopping over the last 15 years, which has accelerated sharply due to the impacts of the lockdowns.

Commenting on the supply chain issues, CPA Economics Director, Noble Francis, said: “Demand continues to be remarkably strong across the construction industry but supply issues are hindering growth and will continue to do so in the medium-term. The biggest impacts of the supply constraints are on the small construction firms. Large contractors and major house builders have a greater certainty of demand over the 12-18 month horizon and are better able to plan and purchase in advance as well as adjust to changing economic situations. Small firms, however, are more focused on flexibility and have less visibility over demand going forward. Plus, they have less ability and resource to plan and purchase in advance. They often turn up at builders merchants on the day to purchase what they need for that day or the next few days. As a result, it leaves their business more exposed to availability issues and their cash flow exposed to sharp rises in costs.”

The latest information from Builders’ Conference shows that there were 441 contracts worth £7.5 billion awarded in September. Whilst the value was 60% higher than the previous month (£4.7 billion), it did include a £2.2 billion contract for the Colne Valley Viaduct which is part of HS2, underlining the importance of the Government’s investment in infrastructure. For the first time since December 2020, the public sector outperformed the private sector, recording 51% of the value. There were 165 housing projects worth £2.5 billion (33%) and 55 office projects with a total value of £561 million (8%).

The number of tender opportunities was 24% down on August and remained 53% below the monthly average for the past year.

NBS & Glenigan are working on some brand new research to create the Construction Manufacturers’ Marketing Index – to find out how manufacturers are marketing their construction products.

These unique findings will provide an essential tool for the construction industry to see holistically how marketing is applied, how digitised the approach is and how manufacturers marketing strategy and activity compares. For those manufacturers that take part they will get early access to the survey results so they can use it for their 2022 marketing planning.

The survey covers the following key topics the survey covers:

• Manufacturers approach to marketing
• Manufacturers current activity
• Marketing within construction
• Manufacturers future marketing activity

To take part in the survey, and gain early access to the results, submit your response at www.thenbs.com/marketing-index-2021 Closing date: 24 octobber 2021

This new report, a collaboration between Barbour ABI and CPA, seeks to analyse construction contract awards at a high level of regional granularity, firstly to identify pockets of growth or contraction – hotspots and coldspots – in regional activity and secondly, to offer a forward-looking indication of growth by region and by sector.

The report identifies London remains the UK’s largest regional economy and construction gross value added (GVA) in 2019 (the latest available from the ONS) was £22.6 billion, accounting for 18.5% of the UK construction total. With a construction GVA of £19.4 billion, the South East accounts for a similar proportion of UK construction (15.7%).

Given the relative size of the London and South East economies, populations and concentration of the services-based industry, it is easy to think that the majority of construction work is taking place in these regions. By using ONS regional economic data, it becomes clear that despite its overall dominance, there were only three London sub-regions in the top ten largest local authority areas for construction activity in 2019: Camden and City of London, Harrow and Hillingdon, and Westminster. Similarly, two sub-regions in the South East feature in this ranking. However, it is Hertfordshire, in the East of England, that remains as the sub-region with the largest value of construction activity in 2019. The South West, Yorkshire and the Humber, and the East of England complete the top ten list, underscoring the fact that there are large areas of activity beyond the traditional engines of growth.

The full report can be downloaded by FIS Members here.

 

The latest information from Builders’ Conference shows that there were 454 contracts worth £4.7 billion awarded in August. Whilst this was lower than the previous month as the industry had its traditional and well‐deserved summer break, both the number and value of contracts awarded this August were higher than August 2020, indicating that construction’s recovery is holding steady. 41% of all the contracts awarded by value were housing (£1.9 billion), 16% were office projects (£754 million) and 9% were education projects (£407 million).
 
The number of tender opportunities was 22% down on July and remained 40% below the monthly average for the past year.