In its latest quarterly forecast, the Construction Products Association (CPA) forecasts that output in the industry will grow by 4.3% in 2022, slowing to 2.5% in 2023 compared to the 13.3% seen in 2021. This demonstrates the remarkable resilience of the sector to the initial Covid-19 lockdown and the end of the Brexit transition period in 2020. Housebuilding, the largest sector within the UK construction industry, is expected to remain strong whilst  infrastructure will be the major driver for growth. Projects already underway in all sectors give great confidence for the forecast figures.

Continuing to benefit from the ‘race for space’, output in private housing is forecast to rise by 3.0% in both 2022 and 2023 following 17.0% growth in 2021. CPA suggests that the double-digit inflation in house prices will fall as the impact of the end of the stamp duty holiday and the further restriction of the Help to Buy scheme feeds through. The outlook for volume remains positive, with most major house builders reporting strong near-term demand and healthy profit margins fuelled by demand for housing in affordable areas of the UK. Also benefiting from the ‘race for space’ in the near-term is the private housing rm&i sector. Here the CPA forecasts output to remain flat at the historically high level reached with 17% growth last year. Rising renovation project costs and higher inflation rates are expected to slow down consumer spending on larger projects. UK households have benefited from building up over £200 billion of savings from the past two years but rising costs are spelling caution for spending compared to 2021.

The CPA Winter Forecast indicates the infrastructure sector to remain as the main driver for growth in 2022. This mirrors the CPA Autumn Forecast which pointed to the five-year spending plans within the regulated sectors of rail, water, roads, and energy, allowing the sector to maintain activity levels and weather supply issues. Key projects include the Thames Tideway Tunnel, Hinkley Point C and HS2. At least two of these projects report delays due to supply constraints and this could result in further work being pushed into 2023. Taking this into account, the sector is still expected to rise by 9.7% in 2022 and 1.1% in 2023, taking the sector to a new all-time high.

Product supply issues, a major challenge in 2021, have eased recently, but may still cause problems. The CPA still considers these to be the biggest challenge to overall growth. Questions over sufficient materials, products, labour, HGV drivers and imports will be at the forefront of industry. These challenges are not spread equally across the sector, with smaller specialist sub-contractors feeling the pressure more.

Major house builders and main contractors are less affected as they have better visibility of medium-term demand and can plan and purchase well in advance; plus, they are the larger customers of the manufacturers, builders’ merchants and importers. Smaller firms, however, have found that availability issues have delayed projects and, consequently, revenue streams whilst sharp cost increases have hit margin, harming their viability even though they have strong workloads. Overall, the latest indications are that supply issues have eased recently, which is a positive sign, although it is still early in the year and before industry activity tends to ramp up in the Spring.

The latest information from Builders’ Conference shows that there were 447 contracts worth £5.1 billion awarded in November. This is an improvement after the dip in October and the industry will be hoping that activity holds up in the New Year and the emergence of the Omicron COVID‐19 variant does not cause too much disruption.

76% of all the contracts awarded by value were in the private sector. There were 156 housing projects worth £2 billion (38%), 60 office projects totalling £527 million (10%), 80 education projects worth £480 million (9%), and 20 industrial projects with a total value of £418 million (8%), including the month’s largest contract for £220 million to build a distribution centre in Sutton Coldfield, on the outskirts of Birmingham.

The number of tender opportunities was slightly higher than the previous month but remained 43% below the monthly average for the past year.

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