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Suppliers' jump in sales offers industry hope

Industry activity continued to grow between July and September, according to a new survey by the Construction Products Association.

Construction suppliers reported growth in sales, output and workloads in Q3, driven by demand in new private housing, repair and maintenance, and infrastructure.

A net balance of 30 per cent of suppliers of heavy-side products – such as aggregates, cement and steel – reported higher sales compared with 12 months earlier, while a balance of 45 per cent of suppliers of light-side products – like plumbing, electrics and fixtures and fittings – reported a rise.

On balance, 40 per cent of contractors reported a rise in output in Q3 2017 compared with Q3 2016.

This represented the 18th consecutive quarter of growth according to the CPA’s Construction Trade Survey, and suggests the industry could be in better shape than shown in other recent data.

Build UK CEO Suzanne Nichol said: “The latest Construction Trade Survey result highlights the industry’s continued growth, contrary to ONS’s statistics, with both contractors and specialist contractors reporting a rise in output during Q3.”

Last month’s ONS GDP figures recorded a fall in construction output for a second consecutive quarter in Q3, technically putting the industry in recession.

This contrasted with the CPA’s findings; however, the association also found that contractors, SMEs, product manufacturers and specialist contractors were facing various difficulties.

The number of enquires and expected sales for the next 12 months were subdued, with much of the demand coming from just three sectors: private housing; housing repair and maintenance; and non-housing repair and maintenance.

CPA senior economist Rebecca Larkin said: “There is a clear division in fortunes across sectors, with weakness in the commercial and industrial sectors offset by strength in new-build private housing, a sector where demand and confidence remain supported by the Help to Buy equity loan.”

Cost pressures are also causing difficulties, with around nine out of 10 respondents saying raw material prices had risen in the third quarter.

This inflation is squeezing profits, with most contractors choosing to absorb price rises instead of increasing tender prices, resulting in a net balance of 31 per cent of contractors reporting a fall in margins.

The CPA said this was “the worst balance in five years”.

Recruiting site trades posed a further problem, with a net balance of 44 per cent saying they had difficulty hiring people.

CECA director of external affairs Marie-Claude Hemmings said: “Uncertainty continues to act as a drag on the ability of the construction industry more generally to boost the economy.

“Ahead of the Autumn Budget, we are calling on the UK government to commit to the projects outlined in the National Infrastructure Delivery Plan, to secure the foundations of a strong economy, drive productivity, and deliver post-Brexit growth.”

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