Construction Sector Begins to Catch Up

Activity in the construction supply chain significantly picked up in the second quarter of 2018 as the industry began its catch-up of work lost due to delays related to Carillion and severe weather conditions in Q1, according to a survey of product manufacturers, contractors, civil engineers and SME builders by the Construction Products Association.

The Construction Products Association’s Construction Trade Survey for 2018 Q2 shows that during the quarter, 20% of heavy side product manufacturers and 6% of civil engineering firms returned to growth, whilst the proportion of firms reporting an increase in Q2 activity rose for main contractors, light side product manufacturers and SME builders. New orders data signal that the catch-up will continue in the coming quarters, driven by private housing, public housing and infrastructure, three sectors that account for £60 billion of output annually.

Key survey findings include:

• On balance, 15% of main building contractors reported that construction output rose in the second quarter of 2018 compared with a year ago
• 6% of civil engineers, on balance, reported a decrease in workloads during Q2
• On balance, 23% of SME contractors reported increased workloads in Q2 compared to three months earlier
• Main contractors reported that order books were higher in private new housing, public new housing, private industrial and R&M sectors
• 11% of civil engineering firms reported an increase in new orders in Q2, on balance
• 27% of SMEs and 33% of specialist contractors reported an increase in enquiries in Q2, on balance
• Overall costs increased for 75% of civil engineering contractors, 60% of specialist contractors and 73% of heavy side product manufacturers
• 42% of main contractors reported a rise in tender prices in Q2.

Commenting on the survey, Rebecca Larkin, Senior Economist at the CPA, said: “Order books at the start of the year had suggested there was scope for catching up with some of the work lost in the opening three months and the survey confirms the industry made a tentative start in Q2. However, new growth will be skewed towards housing and infrastructure – both privately and publicly funded – which remain dependent on programmes of government support and investor confidence in an environment of increasing economic uncertainty.”

Brian Berry, chief executive of the Federation of Master Builders (FMB), says: “The second quarter of 2018 proved to be a positive one for the UK’s builders. This latest research shows that firms enjoyed stronger growth in workloads than they did in the first three months of this year. Pleasingly, the construction SME sector has now enjoyed more than five years of consecutive growth. Furthermore, employment rose at a faster pace in the second three months of 2018 than it did in the first three months. Looking ahead, despite growing political uncertainty and Brexit now less than a year away, construction SMEs remain positive. Businesses are optimistic with nearly half of firms predicting rising activity levels over the next three months.”