The latest Construction Products Association (CPA) State of Trade Survey reveals that UK construction product manufacturers are becoming increasingly pessimistic of future growth, as input costs rise and uncertainty grows.
According to the survey, which covers Quarter 2 of 2017, construction product manufacturers experienced growth in both sales and activity for the 17th consecutive quarter, but only 7% anticipate a rise in sales in the next quarter. This is a significant decline from the 68% who anticipated a rise when asked in Q1 of 2017.
A sharp rise in input costs was also reported in Q2, with 93% of heavy side manufacturers, and all of those on the light side, reporting an increase in costs compared with a year earlier.
The strongest inflationary pressures came from raw materials, fuel and energy, owing to depreciation in Sterling during 2016, alongside skills shortages pushing up wage bills.
The construction products manufacturing industry has an annual turnover of £55 billion, directly providing jobs for 300,000 people across 22,000 companies. Products range from heavy side materials such as steel, bricks, timber and concrete, to light side products such as insulation, boilers, glass and lighting. On an annual basis, 47% of heavy side firms reported that sales had increased in Q2, while on the light side, 45% of firms reported that sales were higher than a year earlier.
Rebecca Larkin, CPA Senior Economist, said: "It was an eventful quarter on the political front, with the announcement of a snap general election and the resulting hung parliament adding to existing uncertainty over the path for Brexit negotiations. Despite healthy growth in the second quarter, construction product manufacturers have turned more pessimistic over performance for the rest of the year, reigniting concern that the triple hit of imported inflation in raw materials, higher fuel and energy prices and the persistent pressure on labour costs will have a negative impact on demand and construction activity over the next 12 months.
"An increase in overall costs was reported by 93% of heavy side manufacturers and all of those on the light side. Inflation is expected to endure as similar proportions anticipate that costs will continue to climb over the next year. Government's ability to progress the pipeline for large public sector and infrastructure projects is now more important than ever as a means of sustaining activity when private sector decision-making may be stalling."