The Construction Products Association’s latest state of trade survey, published today, indicates that export activity is providing a vital lifeline for many construction product manufacturers, while the UK outlook remains uncertain.
Some 41% of product manufacturers surveyed reported that sales of construction products had increased year-on-year in the second quarter of 2011. Export growth was the primary driver, with the total number of manufacturers exporting (up 18%), as well as the volume of goods being exported, both increasing, and this trend is expected to continue. Exporters were helped by the weakness of pound and favourable exchange rates.
Manufacturers are cautiously optimistic about the year ahead but the stability of domestic demand is a concern as the near term UK economic outlook has deteriorated.
Costs increased during the year for 95% of firms, as fuel, energy and raw materials price inflation accelerated. This concurs with today’s report from the Office for National Statistics that manufacturing input prices rose 17% over the past year. Three in four construction products manufacturers expect costs to continue to rise over the next 12 months.
Headcount at 28% of products manufacturers was lower than in 2010 Q2 but firms expect, on balance, to recruit over the next 12 months.
Commenting on the figures, Construction Products Association senior economist Kelly Forrest said: “While demand for the UK domestic market remains subdued, an increasing number of product manufacturers are turning to exports. These companies are quietly optimistic for the next 12 months. However, with consumer sentiment faltering at home and macroeconomic forecasts downgraded once again, there is enormous concern that domestic demand will decline as public spending is cut over the coming months.
‘Although manufacturers are currently benefiting from a favourable exchange rate, there is great concern within the industry that this will be outweighed by the continual impact of rapidly rising costs.”
Other key findings of the survey were:
- 39% of light side manufacturers increased sales to overseas markets in Q2, with 21% of these firms raising sales by more than 5%
- Exports of heavy side products rose at 23% of firms in Q2
- Sales rose according to 61% of heavy side firms and 59% of light side firms in Q2 (year-on-year)
- On balance, 42% of heavy side firms and 44% of light side firms expect sales to rise over the next year but 71% of manufacturers expressed concern that domestic demand could constrain activity during the year
- Product improvement attracted greater investment during the past year, with 70% of light side firms and 67% of heavy side firms increasing their spend