Construction Product Sales Fall for First Time in Two Years

Monday 17 October 2022

Construction Product Sales Fall for First Time in Two Years

The two-year run of sales growth for construction product manufacturers ended in Q3, according to the Construction Products Association’s latest State of Trade Survey. Furthermore, a slowdown in construction activity in the publicly financed and repair & maintenance sectors since Summer, as well as the deteriorating economic backdrop, underpin manufacturers’ expectations of a contraction for the year ahead.

In Q3, 12% of heavy-side manufacturers reported that sales of construction products declined, marking the first fall since the nationwide lockdowns in 2020 Q2. Alongside this, 17% of light-side manufacturers reported that product sales rose, which marked the lowest balance in two years.

In the Q3 survey, demand was viewed as the key constraint on manufacturers’ activity going forward. On balance, 53% of heavy-side firms, whose products tend to feed into the earlier stages of construction, anticipated a decrease in sales over the next 12 months. On the light side, a balance of 13% of firms anticipated a decline, marking the first negative view since the height of the Covid-19 disruption in 2020.

Rebecca Larkin, CPA Senior Economist said: “The easing in manufacturers’ sales and the emerging weakness in construction output in Q3 is now joined by broader deterioration in the UK economy. High inflation continues to erode household finances and take big chunks out of project budgets, at a time when markets have reacted badly to the new Chancellor’s early fiscal plans and knocked confidence and growth prospects even further.”

She also adds: “With a recession on the cards for 2023, it should come as no surprise that construction product manufacturers are anticipating a contraction in sales and activity. This combines with the strong rates of input cost inflation that already pervade the supply chain and have begun to delay decision-making on construction projects. Hopefully, some of the unanswered questions around the government’s spending plans will be resolved in the coming months and help to lift the cloud of uncertainty hanging over our industry.”

Key survey findings include:

• A balance of 12% of heavy-side firms reported that construction products sales fell in Q3 compared with Q2, ending eight quarters of growth
• 17% of light side firms reported product sales rose, the lowest balance since 2020 Q2
• 53% of heavy-side manufacturers and 13% of light-side firms anticipated a decrease in sales over the next 12 months
• Fuel costs rose for all heavy side and light side manufacturers; energy costs rose for 94% of heavy side firms and 96% of light side firms
• Overall costs are expected to increase over the next year according to balances of 82% on the heavy side and 61% on the light side
• Weakness in hiring intentions was reported by both heavy-side and light-side manufacturers

Overall, the Q3 survey demonstrates the impact of existing inflationary pressures combined with early signs of a deterioration in the economic situation, leading to a decline in construction product manufacturers’ sales and forward-looking expectations.

ENDS

NOTE TO EDITORS:

Underpinned by a comprehensive survey of our members, the CPA State of Trade Survey provides a timely analysis of current trends in the construction products manufacturing sector and an assessment of likely trading conditions going forward. To find out more about of State of Trade Survey click here.

Heavy side products are typically structural materials used early in the construction process and include materials used in transport and other civil engineering projects. Heavy side materials include aggregates, cement, ready-mix concrete, and structural and reinforcing steel. Light-side products are typically installed later in the construction process and include internal fittings and services. Light side products include heating and ventilation systems, plumbing, electrical and lighting, doors and windows, kitchen furniture and thermal insulation.

The Construction Products Association is the leading organisation that represents and champions construction product manufacturers and suppliers. This vital UK industry defines our built environment, providing the products and materials needed for homes, offices, shops, roads, railways, schools and hospitals. Our industry directly provides jobs for 382,500 people across 23,949 companies and has an annual turnover of £62.5 billion.

The CPA produces a range of economic reports that provide its members, policy-makers and the wider industry with a detailed understanding of the construction market to facilitate planning and business development. Members of the Association are entitled to receive these insights at no additional cost. Non-members can make one-off purchases or subscribe for a full information package.

FOR FURTHER INFORMATION CONTACT:

Rebecca Larkin, CPA Senior Economist

Tel:      020 7323 3770

E-mail:  rebecca.larkin@constructionproducts.org.uk

Sami Miah, CPA Communications Executive

Tel:      020 7323 3770

E-mail:  sami.miah@constructionproducts.org.uk

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