Firms not expecting improvements during forthcoming quarters

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UK construction product manufacturers are expecting slower growth in sales and activity as cost rises and slower output continue to weaken market conditions.

This is according to the Construction Products Associations (CPA’s) State of Trade Survey for Q3.

Products range from ‘heavy side’ materialsused earlyn the construction process, such as steel, bricks, timber and concrete to ‘light side’ products userd later on such as insulation, boilers, glass and lighting.

One in ten of heavy side manufacturers reported an increase in sales in Q3 compared to 40% in Q2 while on the light side, 36% reported higher sales, decreasing from 55% in the previous quarter.

On an annual basis, sales rose for 30% of heavy side firms and 45% of those on the light side, while cost increases were reported by nine out of ten manufacturers on both sides.

Raw material costs rose according to 85% of heavy side firms and all of those on the light side, with 78% of the former and 67% of the latter anticipating a rise in costs over the next year.

For the year ahead, 28% of heavy side firms anticipate an increase in product sales, whilst on the light side, 33% expect sales to rise.

The CPA said the weaker performance in Q3, along with rising costs for raw materials, fuel and energy, echoes the slower construction activity already seen across industry data and recent surveys.

It added this has also lowered manufacturers’ expectations for product sales in Q4. No firms on the light side anticipate an increase in sales during the period, whilst 21% of heavy side firms expect sales to decline.

Rebecca Larkin, senior economist at the CPA, said: “For construction product manufacturers, the near-term outlook is being clouded by the perfect storm of a broad-based rise in input costs, slower economic growth and signs of an emerging weakness in construction activity outside of private housing.

“Although the survey showed inflationary pressures are anticipated to ease slightly over the coming year, the industry has turned noticeably more pessimistic about the strength of activity in coming quarters.

“New orders in construction fell to the lowest level in three years in Q2 and the survey suggests this will start to filter through to reduced activity on site by the end of the year.”