UK construction industry reports further growth

The latest Construction Trade Survey shows that firms across the construction industry reported an eighth consecutive quarter of growth in activity in the first quarter of 2015. Large contractors, SMEs, civil engineers and product manufacturers all enjoyed growth in output in the first quarter of 2015, and further expansion is anticipated throughout 2015.

Commenting on the survey, Dr Noble Francis, Economics Director at the Construction Products Association, said: “Activity rose in the first quarter of 2015 compared to a year earlier according to 50 per cent of contractors, on balance. Furthermore, increases in orders and enquiries indicate that the construction industry’s longest expansionary streak in six years is set to continue over the next 12 months.

“Increased activity was led by the private housing sector, in which 54 per cent of firms, on balance, reported a rise in output.  Increased output was also reported in private commercial, the largest construction sector, where 23 per cent of firms, on balance, reported rising volumes of offices and retail work.

“This momentum is set to continue, as it was in the private housing and commercial sectors that contractors registered growth in order books in 1Q. Specialist contractors and SMEs also reported a noticeable upturn in new enquiries in the quarter.

“Increased activity over the last two years has widely translated into higher tender prices, but contractors, SMEs and civil engineers also reported elevated costs on the labour and materials side, which in turn are squeezing profit margins. Only product manufacturers reported a significant benefit from the downward movements in fuel, energy and exchange rate costs.

“A balance of 81 per cent of contracting firms experienced cost increases during 1Q and 63 per cent reported an increase in labour costs. In addition, 59 per cent of contractors reported difficulties in recruiting plasterers in 1Q and 56 per cent experienced difficulties in the availability of bricklayers. Ongoing difficulties in recruiting skilled on-site trades will contribute to this upward pressure on costs.”

Stephen Ratcliffe, Director UKCG, said, “The continued growth in construction reported by the latest survey is encouraging, and hopefully the clear general election result will help minimise any impact on work pipelines. Rising costs continue to reflect skills shortages, and the need to focus on recruiting and training new people into the industry.”

Richard Beresford, Chief Executive of the National Federation of Builders, added, “Companies are finding that prices agreed during leaner times have risen and are eroding profits, despite a rise in orders. With the industry entering a growth period, companies must take a longer term view when setting prices to ensure their survival.”

Dr Diana Montgomery, Chief Executive of the Construction Products Association, concluded, “Surveys from the CPA, wider industry and independent sources indicate that the UK construction recovery appears set to continue through 2015.  Despite rising costs and general election uncertainties, enquiries and orders are clearly translating into activity on the ground and contributing to steady and consistent growth.”

Key survey findings include:

• 50 per cent of building contractors, on balance, reported that construction output rose in the first quarter of 2015 compared with a year ago
• Private housing output rose in 1Q according to 54 per cent of building contractors, on balance
• 23 per cent of building contractors, on balance, reported that private commercial output rose in the first quarter of 2015 compared with a year ago
• Nine per cent of building contractors reported a fall in both housing and non-housing repair and maintenance output in 1Q, on balance
• Nine per cent of contractors, on balance, reported a rise in orders for private housing in 1Q
• Prders in the private commercial sector increased according to 25 per cent of contractors, on balance
• Public housing orders decreased in 1Q according to 45 per cent of building contractors, on balance
• A total of 63 per cent of firms reported labour costs rose and 81 per cent of firms reported that materials costs rose in 1Q compared with the previous quarter
• A total of 59 per cent of building contractors reported difficulties recruiting plasterers in 1Q compared with 31 per cent in 4Q.