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Construction product manufacturers brimming with confidence

27 Apr 15 UK manufacturers of construction products report continued rising sales in the first quarter of 2015 and there is strong confidence that growth will continue or the next 12 months.

The Construction Products Association’s latest state of trade survey for the first quarter of 2015 indicates an eighth consecutive quarter of increasing sales for construction product manufacturers

A net balance of 50% of heavy side firms reported that sales rose during the first quarter of 2015, compared to a year earlier. This means that the percentage of firms reporting growth was 50 percentage points greater than the number seeing no growth. For light side firms, a net balance of 29% reported sales growth in Q1

A balance of 69% of heavy side product manufacturers and 57% of light side product manufacturers reported that they anticipate sales rising over the coming year.

Fuel costs fell for a balance of 86% of heavy side firms and 83% of light side firms, to the lowest balance recorded in four years of the survey

On the down side, exports of UK construction products fell – of those that sell overseas, a balance of 25% of heavy side firms and 14% of light side firms report a downturn here – but most manufacturers predict these to bounce back. A balance of 29% of heavy side firms and 20% of light side firms anticipate a rise in exports over the next year.

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Construction Products Association economist Rebecca Larkin said:  “Product manufacturers opened 2015 with another positive quarter of sales growth, which underscores how the strength of the UK economy over the last 18 months has translated into increased activity in the construction sector. 

“A rise in first quarter sales was reported by 50% of heavy side firms and 29% of light side firms, compared with the same quarter a year earlier.  Some weakness in external demand was noted, as the strong sterling hindered exports to the eurozone. Nevertheless, further growth in sales is anticipated over the next 12 months by 69% of heavy side firms and 57% of those on the light side, underpinned by demand both at home and abroad.

“Developments in the global economy have benefited firms on the cost side, however.  Wages and salaries have been the key driver of cost inflation since 2014, but from the end of last year, this has been partly offset by the impact of lower oil prices, which averaged $64 per barrel in Q1.  Registering the sharpest negative balance seen in the survey, fuel prices fell for 86% of heavy side manufacturers and 83% of light side firm in the period.  Firms also reported falling energy and import costs, on balance.

“Encouragingly, product manufacturers appear keen to capitalise on this sustained period of activity and shore up demand in the longer-term.  Priority areas for investment over the next 12 months, cited by more than two-thirds of firms, were product improvement, research and development and e-business.”

A balance of 77% of heavy side firms and 64% of light side firms anticipate increasing investment in research and development (R&D) over the next 12 months.

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