In its latest quarterly forecast, the Construction Products Association (CPA) sees a dramatic slowing in growth, with uncertainty ahead as global issues start to affect the UK market.

In previous years, the predicted 2.8% growth in construction output anticipated by the CPA team would be cause for celebration. However, while a robust figure, this is a sharp revision down from the 4.3% growth forecast just three months ago.

Demand remains strong across the industry in Q2, and the current project pipeline suggests that this will support activity levels until at least 2022 Q3. The downward revision to the growth forecast stems from concern around a host of price pressures arising from both local and global issues.

Prior to the conflict in Ukraine, UK construction was already facing labour and product availability issues and the impact of reverse charge VAT and IR35. Rising energy costs were driving near-record price increases in construction products and the continued conflict is exacerbating this issue.

The impact of these pressures, and of more general rising costs, on demand will vary considerably by sector. Across the board the picture is one of positive market conditions in the short term with anticipation of tougher times ahead.

In private housing repair, maintenance and improvement, the stellar performer post the initial Covid-19 lockdowns, SMEs report that demand remains high, but this is the sector arguably most exposed to current price inflation, falls in consumer confidence and pressures on household incomes. Overall, output is expected to fall by 3% in 2022 and 4% next year from current all-time highs.

Private housing, the largest construction sector, remains strong, with housebuilders reporting resilient demand. Longer term, there must be questions over consumer confidence but output in this sector is forecast to rise by 1% in both 2022 and 2023. This contrasts with the 3% per year growth forecast three months ago.

The fastest growth is expected in the industrial sector, in which output is forecast to rise by 9.8% in 2022 and 9.3% in 2023, due to a strong pipeline of warehouse projects, resulting from a long-term shift towards online shopping.

Infrastructure, traditionally less affected by immediate economic conditions, remains positive. Large projects such as HS2, Thames Tideway and Hinkley Point C combined with the five-year spending plans in Page 2 of 3 regulated sectors such as rail, road and power generation point to a forecasted growth of 8.8% in 2022 and 4.6% in 2023.

On the supply side, the main immediate impact of the war in Ukraine for construction products will be the knock-on from rising energy prices and commodity shortages. Soaring energy costs will have to be passed on and lead to sharp rises in the cost of energy-intensive products. This will affect both imported products such as aluminium and steel and locally sourced products such as bricks and cement.

Contractors are likely to feel the pressure first, particularly those working to fixed-price contracts. For future projects, contractors will be forced to re-price, add fluctuation costs and introduce risk-sharing arrangements to deal with the uncertainty over potential cost inflation.

Noble Francis, CPA Economics Director, offered this summary of the latest figures:

“The major challenge is creeping uncertainty. The immediate picture is one of resilient demand and healthy pipelines. Longer term, the current inflationary pressures, if sustained, will have an increasingly depressing impact, while the continuation, or potential escalation, of conflict in Europe presents an existential risk.

“Specialist sub-contractors are feeling the effects first, particularly those working to fixed-price contracts. For future projects, contractors will be forced to re-price, add fluctuation clauses and introduce risk[1]sharing arrangement to deal with the uncertainty over potential cost inflation.”

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FIS issued a reminder this week that new product marking requirements are still set to be introduced from 1st January 2023.  From this date it will no longer be legal, except in Northern Ireland, to place CE marked products onto the UK market.  Products previously covered by a Harmonized Standard (e.g. ceiling systems) will be required to be UKCA marked if they are placed on the market from 1 January 2023. 

Beyond this period UK compliant Declarations of Performance will be required to refer to Designated Standards and may need to be retested by a UK Approved Body. 

Distributors and manufacturers of products and contractors purchasing products are reminded to check that their supply chain have this in hand as soon as possible to ensure that there are no interruptions to supply in the New Year.  Remember that that this may impact components that are bought seperately and integrated within your products such as glass, electric motors or hardware.

FIS is aware that there are major bottlenecks at UK test houses and there are concerns that essential testing may not be completed before the deadline.  

If for any reason you or your suppliers experience problems, please let us know as soon as possible.  FIS is feeding concerns into Government directly and via the CPA and continuing to press for an extension to this deadline, so that we can let Government know that this may result in delays to projects.

More information on the UKCA Marking is available here. 

To visit the FIS Brexit Toolkit Click Here

FIS is continuing its support of the 2022 Inspiring Change Awards, that were introduced in 2016 to recognise companies working in the construction, infrastructure, and built environment sectors.

There is no charge to enter, and attendance at the Conference & Awards Ceremony is also free of charge.

Creating open and inclusive workplace cultures in which everyone feels valued, and respects colleagues, is recognised as key to business success. Becoming a finalist or winner in the Inspiring Change Awards is a great way to raise your company profile as they highlight organisations that understand the broad scope of diversity, nurture a culture of Fairness, Inclusion and Respect, and have taken active steps to promote equality of opportunity in the workplace and wider community.

The Inspiring Change Awards are part of the FIR Programme, and are part-funded by CITB.

In 2022, Awards will be presented in the following categories:

• Inspiring Change in the Workplace
• Inspiring Change in the Community
• Inspiring Change in Education
• Inspiring Change: Project Award
• Inspiring Change: SME Award
• Inspiring Change: FIR Inspiration

The deadline for entries is the close of business on Friday 13 May 2022.

This year the Awards Ceremony will be incorporated into a one-day Inspiring Change Conference, which will be held on 6 July 2022 at No. 11 Cavendish Square, London W1G 0AN. The conference will bring together a range of inspirational speakers from diverse backgrounds, including industry stakeholders and representatives from a range of sectors. The Awards Ceremony, which is free to attend, is sponsored by CITB and the individual awards will be sponsored by major clients and other stakeholders.

For more information and details on how to enter, please visit www.inspiringchangeawards.com  or e-mail inspiringchangeentries@ceca.co.uk