Construction market demand for mineral products started slowly in 2018, with activity affected by the cumulative effect of bad weather and the collapse of Carillion. But it rebounded in the second quarter, latest data from the Mineral Products Association (MPA) show.
After accounting for typical seasonal variations, sales volumes for aggregates and ready-mixed concrete saw an increase by 9.2% and 9.8% respectively in Q2 2018 compared to the previous quarter, and by 11.3% for asphalt.
Materials such as aggregates and ready-mixed concrete are used across all types of construction work, mostly in the early stages of projects. The recovery in sales volumes for these materials is therefore an indication that general construction activity also rebounded from the slow start of the year.
The growth remains heavily skewed towards housing. Mortar sales, which also saw a bad weather blip in Q1 2018, recovered strongly in Q2 to rise 20.9%. The MPA quarterly sales survey shows that the volume of mortar sold in Q2 2018 was the highest quarterly total since its records began in 2004. Sales volumes for every other material monitored remain well below their pre-recession peak in 2007, however.
Despite the improvement in construction market demand in Q2, the underlying longer-term trends remain subdued, the MPA said. Sales volumes for all materials except mortar were lower in the first half of 2018 compared to 2017. In the year to June 2018, sales volumes of aggregates were 1.7% lower than the previous year, 3.1% lower for asphalt, and 5.4% lower for ready-mixed concrete. By contrast, mortar sales volumes grew by 12.7% over the same period. The longer-term weakening in mineral products markets suggests construction activity outside housebuilding remains subdued.
MPA sales volumes in GB, summary table
There were substantial regional variations. Sales volumes for asphalt in the first half of 2018 point to positive road activity in the southeast and southwest but declines in the West Midlands, the northern regions of England and in Scotland, where some large transport projects came to an end last year.
Ready-mixed concrete sales, by contrast, were weaker across all regions of Great Britain compared with the first half of 2017. The biggest decline took place in London, which had seen very strong post-recession growth, and most likely reflects a slowdown in commercial office building.
% Change on previous period (seasonally adjusted)
MPA director of economic affairs Aurelie Delannoy said: “We welcome the recovery in sales volumes in the second quarter, but the outlook for this year has not changed and remains subdued. Sales volumes weakened in the past year, in line with general construction work. Outside housebuilding, there are limited sources of growth. Major infrastructure investments such as High Speed 2, Hinkley Point C and Highways England’s road programme should provide a boost, most noticeably from 2019 onwards, if momentum is sustained.
“There is little doubt that the heightened level of economic and political uncertainty is having an adverse impact on private investment, notably in some areas of construction such as commercial office building. This is not helped by continuing uncertainty about the delivery of infrastructure projects and related timings. The construction supply-chain, including mineral products, is key to the delivery of government policy on housing and infrastructure but is in a very challenging situation when it comes to planning for future work and investment. The potential ‘no deal’ Brexit would further threaten construction investment. In such a scenario, the mineral products industry and other sectors in the construction supply chain would become early victims of the economic fallout. As such, the negotiating parties need to maintain focus on economic realities to avoid such an outcome.”
Seasonally adjusted MPA sales volumes in GB (million tonnes/cubic metres)