Despite Brexit turmoil and uncertainty, the construction products sector is expecting sales to keep rising for the next 12 months at least.
The Construction Products Association’s state of trade survey for 2019 Q1 reveals a net balance of 46% of manufacturers experiencing a rise in sales during the quarter. Growth in manufacturers’ output is anticipated to rise further in the coming months, with 33% of heavy side firms and half of those on the light side expecting an increase in sales in Q2.
A lack of clarity over the political and economic situation may be holding back capital investment, however. A net balance of only 8% of heavy side firms reported an annual increase in investment in structures and 17% reported that investment in plant and equipment was higher than a year ago. This compares to five-year average balances of 21% and 54%, respectively.
CPA senior economist Rebecca Larkin said: “Recent construction data has painted a mixed picture of the demand for manufacturers’ output, particularly in sectors where confidence has been hit by Brexit-related uncertainty such as commercial offices, industrial factories and high-end residential. Contrast this with almost half of product manufacturers reporting increased sales in Q1, and the anecdotes of on-site stockpiling further down the supply chain seem to be ringing true.
“Although the uncertain climate may be helping manufacturers’ sales, the negative impact has been on the sector’s capital investment. Heavy side firms have reported a noticeable slowing in investment in new buildings and plant, and investment intentions for the next year remain equally muted. With the risk of a No-Deal Brexit and its damaging effect on construction activity still present, clarity is urgently required.”
At the same time, latest figures from the Office for National Statistics show domestic brick manufacturing continuing to rise steadily further, easing any concerns over product shortages.
Production numbers for February show a 2.8% rise over the same month in 2018, with the quarterly production numbers up 6%.
The Brick Development Association’s Tom Farmer said: “The last calendar year has seen the brick industry ploughing millions into manufacturing production and we see the results in a steadily increasing output.
“We know that our members are taking a long term view of UK housing and are investing with confidence that the demand for new homes continues to outstrip supply by a considerable margin. There is only one way out of that situation and that’s to build more houses.
“We are confident that current and future governments will continue to view housing as a top priority in domestic politics and our manufacturers are working to ensure that brick availability will not be an issue.”
The BDA’s upbeat assessment of future housing demand is bullish given a flatlining in new housebuilding. Figures from the Ministry of Housing for the last quarter of 2018 show housing starts down 2% on the same period a year before with NHBC figures for February showing an even more marked 7% decrease in registrations over February 2018.
“There is no doubt that political uncertainty is affecting private sector activity” continues Farmer. “However, the market for affordable homes remains strong and we anticipate that once some degree of political clarity returns, we will see renewed energy in the housing sector.”