Opinion Former Article

CPA: 2007 off to a Blinder!

The Construction industry has enjoyed a firm start to the year, with growth expected to gather momentum over the coming months according to the latest joint Trade Survey Report from the Construction Products Association and the Construction Confederation.

Overall, construction output continued to expand during the first three months of the year. The expansion in output follows a positive 2006 and confirms industry forecasts of an acceleration in construction growth over the course of 2007.

Building contractors' output during the first quarter was ahead of a year ago, with growth driven by increases in both social and private new housing activity together with a strong commercial sector. Encouragingly civil engineering contractors also report a continuing strong upwards trends in workload, although transport infrastructure activity, in particular motorways and trunk roads projects remains weak.

Construction product manufacturers have enjoyed an overall rise in sales volumes, with light side product sales especially buoyant. The performance of heavy side firms was more mixed, with the slow delivery of transport infrastructure projects dampening sales.

Looking ahead, construction products manufacturers anticipate buoyant market conditions over the next twelve months. On the back of increased enquiries for new work building contractors also expect a further rise in their output. Similarly, civil engineering contractors anticipate the upward trend in orders and workload to continue. Industry growth is expected to gather momentum during the course of 2007, benefiting from stronger private sector investment and a pick-up in government funded work. However, housing and non-housing repair, maintenance & improvement work is expected to remain muted.

Commenting on the latest survey, Máren Baldauf, Economist at the Construction Products Association said; "The increase in construction products sales during the first quarter was primarily driven by light side manufacturers, while the performance of heavy side firms was far more mixed. Encouragingly, the upturn in construction activity is expected to continue over the course of the year. Whilst products manufacturers continue to report widespread costs increases, the impact of higher energy costs appears to be stabilising, which should moderate the rise in material price inflation medium term".

Stephen Ratcliffe, Chief Executive of the Construction Confederation said: "The overall trend is still very positive and the key to maintaining this sustained growth is consistency and continuity, particularly in public sector investment. While building and civil engineering contractors remain optimistic about future work, it is disappointing that transport infrastructure activity remains weak. Since the Transport Plan was effectively abandoned in 2004, there has been a lack of clarity on transport infrastructure investment and it is showing."
Key survey findings are:
. Contractors report first quarter output was ahead of a year ago, with a fifth of firms on balance reporting that output was up on a year earlier.
. Overall construction product sales continued to strengthen during the first quarter, with 18% of firms on balance reporting higher sales than a year ago. On balance two thirds of light side firms report that sales volumes were up compared to last year and half had seen sales rise by over 5%. Heavy side sales were more mixed. Whilst a balance of 10% of firms on balance reports a fall in volumes, a third of firms had seen an increase in sales volumes.
. Products manufacturers expect buoyant market conditions over the next 12 months, with 94% of firms anticipating higher sales volumes.
. Civil Engineering contractors reported a further rise in total civil engineering workload, increased employment of operatives and staff, and order books fuller than a year ago. Works to prepare sites for building developments rose particularly strongly during the quarter.
. Both heavy and light side products manufacturers continued to report widespread increases in their unit costs, with 40% of firms seeing their unit costs rise by 'more than 5%'. However, the impact of higher energy costs appears to be stabilising with on balance a third of firms reporting that higher energy prices had contributed to the rise in their unit costs, compared to two-thirds of firms in the previous survey
. The rise in unit costs continues to filter through to manufacturers' selling prices. On balance 83% of firms report that their selling prices had risen in the first quarter compared with a year earlier.
. Contractors report that their building costs continued to increase. This has contributed to a pick up in tender prices with a balance of 15% of firms reporting an increase.
. Contractors' concern over labour availability increased. The availability of plumbers, bricklayers and carpenters worsened. Recruitment difficulties had prompted 16% of firms to turn down work during the quarter, while 30% of firms reported that labour shortages had delayed the completion of projects.

ENDS
NOTE TO EDITORS:

CONSTRUCTION PRODUCTS ASSOCIATION:
The Construction Products Association represents the UK's manufacturers and suppliers of construction products, components and fittings. The Association acts as a single voice for the construction products sector, representing the industry-wide view of its members. The sector has an annual turnover of £40 billion and accounts for 40% of total construction output.

The Construction Products Association undertakes a comprehensive quarterly survey of its members operating across this sector.

CONSTRUCTION CONFEDERATION:
The Construction Confederation is the main representative organisation for building and civil engineering contractors within the UK construction industry, one of the largest and most diverse sectors within the British economy.

The Construction Confederation survey results are taken from the Confederation's 5,000 member companies, which are responsible for more than 75% of construction work in Great Britain. The results are weighted according to the turnover of each participating firm.

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