The latest Construction Products Association State of Trade Survey figures, for Q2 2013, show that building product sales rebounded after poor weather in January and March saw them plummet at the start of the year.
Despite the subdued domestic construction market, prospects remain buoyant for construction product manufacturers for the rest of the year, and a tentative recovery for the sector is forecast.
The three months to June 2013 saw a much-anticipated rebound in sales. Manufacturers across the board were able to make up for some of the output lost during Q1. Sales of structural materials, or heavy-side products, in particular benefitted from the frost subsiding and a recovery in housebuilding, with over half of manufacturers reporting higher sales on the previous quarter.
The pick up in light-side product sales was more disappointing, with no significant recover in the second quarter. However, light-side products tend to be used in the inside of buildings and, as a result, their sales were much less affected by the poor weather in Q1 than their heavy-side counterparts. In addition, as light-side products are used in the latter end of construction, it is likely to be the third or fourth quarters of 2013 before light-side sales benefit from the recovery in private housing.
“Manufacturers providing for a few privileged growth sectors are doing significantly better, while the rest are working hard just to stay stable”
All in all, the picture is mixed. The market is becoming more compartmentalised with sales fortunes more dependent upon the type of product. Manufacturers providing for a few privileged growth sectors are doing significantly better, while the rest are working hard just to stay stable.
Housing market recovery
The housing market is showing signs of recovery with house prices, transactions and housing starts steadily shifting upwards. If the Help-to-Buy scheme, along with a dozen other house building related schemes, increases the number of new homes being built then the outlook for brick manufacturers, for example, should be relatively upbeat.
Similarly, with National Rail’s investment set to rise beyond 2014 and construction of large-scale rail projects such as Crossrail and Thameslink well under way, companies selling products for the rail sector should experience sales growth in the near term. However, the outlook remains challenging for the majority selling products within other sectors.
Growth in exports of construction products
Export sales spell out a further distinction between the haves and have-nots. Stripping out the weather-related bounceback, it is clear that exports continue to make a significant contribution towards sales.
“It is clear that exports continue to make a significant contribution towards sales”
In Q2 2013, 20 per cent of heavy-side and 10 per cent of light-side firms saw exports grow, on balance. The proportion of companies selling their products only to domestic clients also hit a two-year low.
Optimism for sales growth
Cautious optimism is emerging across the sector, be it due to improved confidence in the UK’s growth prospects, or that the hard work on investing in export opportunities is finally paying off.
Even the poor economic outlook for most of the eurozone, downgraded growth projections for emerging economies, or the absence of a credible plan for construction have not dampened the sentiment.
The industry is showing a fighting spirit for the remainder of 2013. Conditions are clearly improving, but in the short-term sales fortunes will depend on the sectors the products are sold into and whether export orders materialise.
Milja Keijonen is an economist at the Construction Products Association
The Construction Products Association State of Trade Survey questions building product manufacturers about past and future trends. Results are calculated using the balance of respondents - a percentage of firms reporting a rise minus those reporting a decline. Manufacturers of heavy-side products typically produce structural materials used early on in the construction process; light-side products are typically installed later in the process.