2011 is shaping up to be a tough year as rising costs can not be passed on to customers

2011 will be a tough year for construction firms according to the Construction Products Association. Input costs are set to increase, after 77% of the firms it surveyed said input costs have already risen “significantly” in the last 12 months.

Manufacturers of construction related products have suffered from rising energy, fuel and materials costs over the last three months and this has led to a sharp fall in margins, with the uncertain economic environment making it difficult to pass on these cost rises.

On average 77% of manufacturers reported that costs rose significantly during the last 12 months, with 60% reporting that costs rose significantly during the last three months alone.

Noble Francis, economics director at the CPA, said: “More than three quarters of manufacturers reported that costs rose significantly over the last 12 months, with the last three months seeing a particularly sharp increase.

“Cost rises were mainly due to fuel, but increases in the prices of copper, steel and plastics also contributed to the rise.

“Looking ahead, the vast majority of manufacturers also anticipate that costs will continue to rise significantly over the next year, which will reduce margins further and push up costs of construction. The Association is forecasting that output will fall by 2% during 2011 due to the impact of the public sector spending cuts, so this will exacerbate problems for the industry.”