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Construction activity now on the rise across all sectors

11 Nov 13 Construction’s recovery is getting broader and deeper, the latest 'survey of surveys' suggests.

The construction trade survey for the third quarter of 2013, published today, shows that construction activity rose for the second consecutive quarter in Q3. 

Growth was reported by firms across all areas of the industry; building contractors, SMEs, specialist contractors, civil engineers and product manufacturers.

Furthermore, firms across the industry are anticipating further growth in the next 12 months.

The construction trade survey is compiled by the Construction Products Association and brings together the results surveying members of the Civil Engineering Contractors Association, Construction Products Association, Federation of Master Builders, National Federation of Builders, National Specialist Contractors Council and the UK Contractors Group.

After five years of subdued economic conditions, optimism appears to be rising across the construction industry.

Order books for building contractors were reported to be the most positive since pre-recession 2007. Some 30% of specialist contactors reported that enquiries for new work rose in Q3. In addition, 30% of civil engineering firms, on balance, reported a rise in order books during Q3.

However, it was not all good news. The construction industry reported that rising costs were a key issue in the third quarter. 66% of heavy side manufacturers and 54% of light side manufacturers reported that costs had risen compared to a year ago with wages & salaries the key driver of these recent cost rises, adding to increases in energy, fuel and materials costs, which have been rising for the last five years despite subdued levels of output in the industry.

Building contractors also reported cost pressures, with a balance of 49% of firms reporting rises in costs in Q3. The cost rises were such that, despite a balance of 4% of firms reporting rises in tender prices, 11% of firms on balance reported that profit margins fell in Q3. Again, labour costs were the key driver of these cost pressures.

Building contractors reported considerable difficulties recruiting two trades in particular: bricklayers and plasterers. Over one third (34%) of firms reported that it was difficult to recruit bricklayers during the third quarter of 2013 and 32% reported that they had difficulty recruiting plasterers. These are both the highest levels of difficulty reported since 2008.

Key survey findings include:

•          43% of building contractors, on balance, stated that activity rose in Q3, the second highest balance since 2007

•          Private new housing was the key driver of construction growth in Q3 with 22% of contractors, on balance, reporting that activity rose in Q3 compared with a year ago

•          Building contractor new orders reached their highest level since 2007

•          The most positive sector for new orders was public non-housing, which primarily covers education and health, with a balance of 9%

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•          49% of building contractors reported that costs rose in Q3, with labour costs and materials costs both contributing to the rise

•          A balance of 4% of building contractors reported that tender prices rose in Q3; however, with costs also rising, a balance of 11% reported that profit margins had continued to fall.

Construction Products Association economics director Noble Francis said:  “It was encouraging to see that the recovery, which started in Q2, has continued into Q3.  A balance of 43% of contractors reported rises in activity, the second highest level since pre-recession 2007.  Although private housing is clearly driving industry growth, all construction sectors enjoyed increases in output.  With rises in new orders and enquiries, the industry clearly expects that the recovery in output will continue over the next 12 months.

“Construction tender prices in Q3 also increased for the first time in over four years, with 4% of firms, on balance, reporting a rise.  However, higher costs, most recently due to increasing labour costs, offset this.  As a result, 11% of firms, on balance, reported that profit margins in the industry declined in Q3.

“Overall, only 7% of firms reported difficulty in recruiting trades to work on construction sites.  However, the breakdown of trades highlights that 34% of firms reported difficulties in recruiting bricklayers and 32% of firms reported difficulties recruiting plasterers due to the sharp increase in private house building in recent months.

UK Contractors Group director Stephen Ratcliffe said:  “These results are more encouraging signs of a turn round in the construction.  Housing, as the leading indicator, is still the main growth driver and general construction still has some catching up to do.  Nevertheless, the mood music amongst UKCG members is more positive than it has been for some time.”

National Federation of Builders chief executive Julia Evans added:  “Confidence is returning to the industry and we are seeing measurable signs of growth and a healthy number of orders.  However, the cost of doing business continues to rise as materials and labour cost increases far outpace revenues.

“Repair and maintenance continues to fall behind all other areas in construction and this could be taken as further evidence that the Green Deal is not yet taking hold.  Furthermore, cutting the Energy Companies Obligation would further depress retrofit activity as it is the only scheme currently generating any significant output in this sector. We need greater promotion of all the options for retrofit and not get tied up in the red tape of the Green Deal.”

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