UK construction manufacturing grows for 15th consecutive quarter but Brexit uncertainty continues
The UK's construction products manufacturing grew for the 15th consecutive quarter in the final three months of 2016 with the majority of construction manufacturers reporting higher sales, new research reveals.
According to the latest Construction Products Association's (CPA) State of Trade Survey, 78 per cent of heavy side firms reported a year-on-year increase in sales in Q4, while on the light side, 75 per cent of firms reported that sales were higher than the previous year - the highest balance for more than two years.
However, as uncertainty intensifies and cost pressures from the fall in the pound since the Brexit vote, the CPA is warning that the industry may struggle to experience similar growth with only six per cent of heavy side manufacturers on balance anticipating a rise in sales in Q1 of 2017 Q1, while 29 per cent of light side manufacturers on balance anticipate a rise during the same period.
The construction products manufacturing industry has an annual turnover of £55 billion and provides jobs for 288,000 people across 22,000 companies.
Products range from ‘heavy side’ materials such as steel, bricks, timber and concrete to ‘light side’ products such as insulation, boilers, glass and lighting.
Rebecca Larkin, CPA Senior Economist said: “Construction product manufacturers ended 2016 on a strong note, with half of manufacturers on both the heavy and light side reporting an increase in sales in Q4, marking not only a fifteenth consecutive quarter of growth, but also the highest balances for the year.
“Unsurprisingly, manufacturers’ expectations for 2017 appear to have been tempered by the uncertainty surrounding the economic and political outlook. Heavy side manufacturers appeared most exposed to the effects of Sterling’s depreciation during the second half of 2016. In Q4, two-thirds of firms reported an increase in costs, the highest in five years, and a further 89% anticipate an increase over the next year. Rising costs of imported raw materials continue to be a primary driver of cost inflation, but there is now an indication that currency weakness is filtering through to higher energy and fuel costs too.
“The impact of Brexit on the construction industry is, as yet, unclear, but it is unlikely this year will be as buoyant as last unless government is able to provide greater certainty and the industry is able to manage cost pressures.”