Construction product manufacturing costs ease but sales growth remains mixed

Construction product manufacturing costs ease but sales growth remains mixed

The Construction Products Association’s latest State of Trade Survey for 2023 Q2 showed a continued split in performance in the construction product manufacturing industry. Heavy side manufacturers’ sales decreased for a fourth consecutive quarter whereas sales from light side producers registered another quarterly increase, adding to a run of growth that began in 2020 Q3. Forward-looking sales expectations suggest these varied fortunes will persist over the next 12 months.

Rebecca Larkin, CPA Head of Construction Research said:

“The mixed fortunes for heavy side and light side sales growth perfectly illustrates the areas of strength and weakness that are appearing in construction right now. Heavy side sales have no doubt been hindered by the sharp slowdown in new house building and hold-ups in starting large new build commercial and factories projects.”

FIS State of Trade Survey Q2 2023: Market holds firm

FIS State of Trade Survey Q2 2023: Market holds firm

Workloads reported by members in the FIS Q2 State of Trade Survey have continued to trend positively with a higher balance (18% up from 5% in Q1) reporting Growth. Within this, 35% of members have experienced growth greater than 5% and just 29% reported a decline for the quarter. The balance (-7%) of respondents did, however, report a decline in sales in Q2 2023 with those reporting a growth in sales dropping from 75% to 43% quarter on quarter. This is the first time the net balance has been negative since Q3 2020.

This trend is consistent with data from Barbour ABI which has highlighted that most sectors have seen falls in terms of contract awards compared to Q1, with notably industrial reducing by 45% and healthcare by 50%. Conversely, awards over Q2 in education continued on a positive trend and the commercial sector remained relatively positive albeit volatile. NHBC has reported that Q2 new house building registrations fell in the UK by 42% compared with a year ago according. It should, however, be noted that was from a base almost double the long-term average. The numbers in 2022 were distorted as house builders worked to get ahead of the new building regulations.

Looking ahead to the next quarter, both sales and workload for the next quarter are trending positively, but the balance is lower than the past couple of quarters. There are still reports of work slipping with rising interest rates and concerns over compliance (particularly linked to staircases) impacting viability of projects. It is also worth noting that, whilst overall trend remains positive, 20% of members are expecting workload to slip by in excess of 5% in Q3.

Members can access the full FIS State of Trade Survey Q2 2023 here 

Government survey of critical supply chains

Government survey of critical supply chains

The Department for Business and Trade is asking FIS Product Supplier members to respond to a short survey which is being conducted by their Global Supply Chains and Economic Security Directorate to identify businesses’ experiences of managing their critical supply chains and protecting against disruption.

The pandemic, as well as changes in the global economy, geopolitical environment and climate, have recently increased the frequency and magnitude of both demand and supply shocks to industry globally. Government and industry have worked closely on responding to this challenge over the past few years. Supply chain disruption continues to be a Government priority.

Through this survey, government is seeking to reach those who are responsible for trade and supply chain decisions within your business. All responses to the survey will be anonymised and any report produced will ensure that no individual respondents can be identified.

Click here to access the survey.  It will be open until 17 July 2023.

FIS State of Trade Survey Q1 2023: Uncertain start, but grounds for optimism

FIS State of Trade Survey Q1 2023: Uncertain start, but grounds for optimism

Uncertainty surrounded the start of 2023 in the finishes and interiors sector with concerns (particularly in the housing sector) resulting in 32% of respondents seeing a reduction in workloads.  Whilst there remain underlying concerns related to ongoing inflation and a rising cost of capital impacting viability and delaying starts, 37% did experience increases and confidence has built through the quarter.

Commenting on the release, FIS CEO Iain McIlwee said:

“The data here was timely as we met wiith Bank of England representatives this week along with a small delgation of construction organisatons led by BuildUK.  The overall situation remains that things are more positive for most than many had anticipated.  There remain some clear risks and uncertainty that will mean growth overall in the economy is likely to remain subdued and this will have an impact on construction.  Interest rates will be key, with inflation reports this week slightly higher than anticipated and consequently the 5.0% peak anticipated rates is already being talked up and we have seen a reaction from certain high street banks increasing mortage rates.  The cost of mortgages and finance for large commercial projects will remain a key risk.

The election will also have a distorting effect, with Autumn 2024 a probable date.  How policy adapts to drive home ownership and construction and encourages investment from business will again be key.  The long term need to get building homes and hospitals as well as redeveloping commercial space to meet modern requirements and sustainable goals is all positive, but how policy drives this may be limited by political motivations.

Resiliance in the supply chain too remains a concern with higher levels of insolvency in construction driven by aggressive procurement and cash/credit issues that are being cascaded through the supply chain and leaving SMEs vulnerable.  The full impact of the Building Safety Act and legacy are still to be fully understood.”

Read the full state of FIS State of Trade Survey Here – FIS State of Trade Survey Q1 2023

See Also – CPA survey reveals a cautious improvement in Q1
After the uncertainty-filled end to 2022, conditions have become more settled in Q1 with product manufacturers’ sales and contractors’ workloads indicating an improvement in conditions for construction.

 

CPA survey reveals a cautious improvement in Q1

CPA survey reveals a cautious improvement in Q1

Surveys from across the construction supply chain showed a more encouraging performance in the first quarter of the year after the uncertainty-filled end to 2022. Looking back to what preceded the opening three months of 2023, the failed Mini Budget from the short-lived Truss government resulted in financial market turmoil, consecutive interest rate rises from the Bank of England, a collapse in housing market demand and widespread reticence to start new projects. As conditions became somewhat more settled in the new year, product manufacturers’ sales, and SME contractors’, civil engineering contractors’ and chartered surveyors’ workloads indicate that there has been an improvement in conditions for construction. However, this is from a low point and net balances remain muted which, in turn, points to only a cautious pickup as the economy still struggles to gain momentum in the light of high rates of inflation and limited growth. Certainly, cost inflation across inputs within construction are still reported as being historically high, exerting downward pressure on margins and likely adding to client hesitation in signing off new work. Forward-looking indicators such as enquiries and new orders point to weakness lingering in new house building, commercial and industrial, but demand strengthening in public non-housing, RM&I and, in particular, infrastructure work linked to energy generation or storage.

CPA Construction Trade Survey

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.

CPA provides economic update

CPA provides economic update

The CPA has produced an Economic Update on 12 May, which members can access here.

The updated issues are in Pages 1-7 of the weekly update whilst subsequent pages have existing data and information that remain relevant. This update includes:

  1. ONS Construction Output (March 2023)
  2. ONS Construction New Orders (2023 Q1)
  3. RICS UK Residential Market (April 2023)

 

Market Data

FIS has access to a wide range of market data from sources including the CPA and Barbour ABI. In addition, FIS produces a state of trade survey specifically for the finishes and interiors sector.