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Sun November 28 2021

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Construction product manufacturers face up to spiralling costs

2 Nov Despite growing supply chain pressures and rising costs, construction product manufacturers are continue to grow their output.

The construction products manufacturing sector expanded for a fifth consecutive quarter in the third quarter of 2021, according to the latest Construction Products Association (CPA) state of trade survey.

Between July and September 2021, a positive net balance of 44% of heavy side manufacturers reported that sales had increased compared to Q2, while on the light side, a balance of 26% reported an increase. However, this was down from the previous quarter’s survey.

Given a strong pipeline of new work in private housing, private housing repair, maintenance and improvement (RMI) and infrastructure, 56% of heavy side and nearly two-thirds of light side manufacturers anticipate further sales growth over the next 12 months.

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The third quarter data, however, showed that cost pressures intensified and broadened, with the costs of raw materials, fuel, energy and wages/salaries all rising across the board. Given the strength of demand for construction products and materials, capacity utilisation also increased in the year to date, particularly on the heavy side.

CPA economist Amandeep Bahra said: “Despite challenging trading conditions stemming Covid-19 and Brexit, construction product manufacturers achieved a fifth consecutive quarterly rise in product sales in Q3. More encouragingly, manufacturers remained optimistic about sales growth over the next 12 months. However, the recent surge in global energy and commodity prices have pushed up energy and fuel costs for manufacturers. All firms surveyed reported an annual increase in fuel costs, whilst the balance citing higher energy costs hit a four-year high for energy-intensive heavy side manufacturers and a nine-year high for light side manufacturers.

"This comes as raw materials and wages & salaries continue to put upward pressure on input costs and with a record high proportion of heavy side firms operating at over 90% capacity, cost pressures are unlikely to abate any time soon, especially, as the full impact of rising energy prices is yet to be felt.”

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