Construction products industry barometer hits zero

Published:  30 June, 2009

LONDON: The sale of construction products continues to decline despite talk of ‘green shoots' in other parts of the economy, according to the latest Ernst and Young/ Construction Products Association activity barometer, which has delivered a figure of zero for the very first time. 

With a figure of 50 representing 'no change' in sales compared to a year earlier and below 50 representing a fall in sales, zero highlights the parlous state in the industry with both heavy and light side product manufacturers experiencing falling sales over the last quarter.

Commenting on the results, Noble Francis, economics director for the Construction Products Association said; "Although April saw a small respite as the intense destocking in the first quarter of 2009 came to an end and production increased slightly, the increase in sales was very brief and the following months saw a return to the deterioration that was happening prior to April.

"Manufacturers are just as pessimistic for the coming months, returning figures of just three for heavy side manufacturers and ten for light side, as they expect further falls in sales over the next quarter.  It is estimated that within construction product manufacturing more than 70 000 jobs have been lost and 12 000 placed on short time working over the past 18 months. With the barometer anticipating further falls in sales during 2009, additional job losses across the industry appear to be unavoidable."

 Dominic McAra, a director in Ernst & Young's building products team added: "This quarter's barometer reflects the tough trading conditions that the sector faces and at this point in time there appears to be no light at the end of the tunnel. The impact of the recession, coupled with the cold winter, has made 2009 a difficult year for all companies.   

"Although the worst of the destocking programmes may now have worked its way through the supply chain, it is going to take increased - and sustained - confidence across all the construction sectors before companies see a return towards the higher levels of sales they have been used to over the last decade.

"As a result, we are seeing companies keeping a tight rein on their cost base, which is having a knock on effect on employment - even where reductions are achieved by the non-replacement of staff rather than through redundancy.

"Cash conservation will continue to be vital over the remainder of 2009 and it is important that companies have suitable financing in place to carry them through to any recovery.  The high levels of rights issues and debt re-financings carried out by the larger UK and European companies, however, should embed some financial stability in the sector – at least for the larger corporates.

"Medium and smaller companies will still need to keep a close watch on their banking covenants - particularly in the last quarter of 2009 where volumes reduce as a result of the winter period."

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