Construction manufacturers have seen a sharp decline in sales, according to new research, reflecting a wider drop in business confidence due to the war in Iran.
Small and mid-sized firms in the category saw their average sales revenue fall by 57% in the first quarter of the year, compared to a 39% drop across all manufacturing categories. Average sales revenue only reached £209,662 – in contrast to the previous quarter when it stood at £486,638. It was also down 66% year-on-year.
The figures appear in the latest manufacturing report from inventory management specialist Unleashed. Its quarterly report is based on data from more than 600 UK firms using the software, across 12 manufacturing categories such as food and drink, clothing and fashion, and construction.
Manufacturers supplying the construction sector ranked 11th out of the 12 categories analysed, likely because they are particularly exposed to volatile energy prices and reliant on imported raw materials. Only the furnishings sector performed worse in Q1, with revenue plunging by 61% from £239,280 to just £92,410.
Weak sales were compounded by a contraction in purchasing and stock on hand across all manufacturing categories QoQ, suggesting that buyers are increasingly cautious about the months ahead.
The value of purchase orders (POs) was down by an average of 27%, suggesting firms are scaling back production expectations amid weaker demand. Stock on hand also declined by around 51% to £268,489, and profitability was down from 35% to 31% – the lowest on record since before 2018. The only positive was that lead times remained stable at an average of 14 days in the first quarter of the year.
Commenting on the figures, Joe Llewellyn, GM of ERP Small Business at The Access Group, the parent company of Unleashed, said: "Tensions in the Middle East, including the Strait of Hormuz blockade, have created significant market uncertainty – and our data suggests this is now taking its toll on manufacturers.
"Having started the year on a growth footing, the first quarter of the year saw the biggest drop in sales revenue we've recorded since 2024. With fuel prices already up, and energy prices expected to rise later this year, the coming months could reduce confidence, increase costs, and squeeze margins even more.
"While many SMEs have slim buffers to weather these changes, our data suggests they're taking steps to mitigate the impact by reducing stock on hand to protect their margins."
