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Boost for construction products sales

Manufacturers are forecasting more growth in business after sales of construction products rose significantly in the second quarter this year compared with 2009.

According to the Construction Activity Barometer from Ernst and Young and the Construction Products Association, most construction product manufacturers expected sales to continue to rise in the third quarter of 2010 compared with the same period last year.

In the Barometer, where a score of 50 means no change in sales compared to a year earlier and below  50 is a drop, the second quarter’s overall score was 77.  However, this is compared to a historic low in sales a year ago.

Heavy side manufacturers’ score rose to 79 in the period, the highest since the second quarter of 2007, while light side manufacturers were also positive with a score of 66.

Heavy side firms were more optimistic about the third quarter of 2010, with 71 per cent expecting a rise in sales compared to the same period last year. Around 38 per cent of light side manfucturers said they expected an increase.

Construction Products Association director Noble Francis said the survey showed the situation for the construction products industry was substantially better than a year ago. However he added that manufacturers were fearful of a sharp fall in the longer term after the planned public spending cuts.

“With government capital expenditure set to be cut by £100 billion over the next five years there is a real danger that any recovery in the construction industry will be delayed,” he said. “This would seriously impact upon manufacturers and suppliers of construction products, holding back a return to growth in the wider economy.’

Dominic McAra, director in Ernst & Young’s construction products team added: “It is good to see confidence returning - although the comparison is to a bad quarter 12 months ago and is after a tough January  and February 2010. This increased confidence has also been reflected in the return of transaction activity to the sector - even if this is still at a more subdued level than pre-recession.

“The next six to 12 months will generate a challenge for the sector as the proposed capital cutbacks take effect. Those companies with a restructured cost base, and re-financing in place, will be in the best position to deal with these challenges whilst still taking advantage of any private sector recovery.  Others may have to approach the next few months with more caution.’