INDUSTRY NEWS
‘ UK Construction Under Pressure ’
BY PHIL SLINGER , CAB CHIEF EXECUTIVE
The UK Construction market continues its bumpy ride through 2021 with labour shortages , material shortages and escalating material prices . Despite these setbacks , the sector remains relatively buoyant for the present .
The Autumn Economic Forecast from the CPA is suggesting that rising costs and contracts on labour and materials will be with us for the foreseeable six to nine months . Consequently , the CPA construction output forecast for 2022 has been revised down from 6.3 % to 4.8 %. Whilst a lower figure , this still represents a significant growth in 2022 given the current market challenges .
Historic Sales Volumes for CAB members have increased on last quarter with 71 % of members on balance confirming increased sales in this quarter compared to the last quarter which stood at 60 %. This increase is ahead of the wider construction industry for the quarter but slightly below trend when looking at the previous year sales .
Expected Sales Volumes are well down this quarter with just 29 % on balance of members expecting an increase in sales in the next quarter , compared to 90 % on balance expected
in the second quarter . The outlook for the year ahead is also more subdued with 59 % of members on balance expecting increased sales volumes . Whilst a subdued forecast compared to the last quarter it must be remembered that the forecast is still positive for growth . The CAB members expectations closely follow that of the wider Construction Industry .
Actual Sales Volumes , year on year , indicate that 71 % of members see an increase in sales of over 5 % this is balanced with just 6 % of members seeing a reduction in sales down by over 5 %. This is to be expected as we come out of the Covid crisis , but with 53 % of members seeing an increase in sales of over 5 % compared to the last quarter , this could further indicate a slowing down in sales .
As would be expected , members see that Historic Unit Costs have risen and Expected
Unit Costs are anticipated to rise even further . It is interesting to see that 87 % on balance of the wider Construction Industry are having the same issues suggesting that not all construction sectors are affected .
Reviewing the Cost Factors , we see that raw material costs continue to be an influencing factor as they have been year to date , but this is now matched by increases in fuel costs , wages and salaries , closely followed by energy costs . Inevitably these rises in costs will have to be passed down through the supply chain .
Likely Constraints on Activity Over the Next 12 Months is dominated by the concerns over Demand and Materials Supply . Whilst Demand has been a concern throughout the year , Materials Supply concerns have dominated both the second quarter and this reported quarter .
Whilst the CAB membership generally experience a strong market sector when compared to the wide construction market , in the third quarter we see for the first time that both Historic Capacity Utilisation and Expected Capacity Utilisation lags behind that of the wider construction market . This suggests that the market problems are becoming worse for aluminium fenestration , facade and building envelope products , this could be due in part to the rising costs of aluminium and its shortage of supply .
The historic Labour Force demand has changed since the quarter one report , which was 15 % negative to a 41 % on next balance for the last quarter . It is reported that labour costs have risen and are expected to rise further in the coming year . Again , the CAB membership experience slightly higher demands than the wider construction sector on net balance .
Exports have held up well for CAB members in 2021 and this quarter report suggest that members see further growth in exports for the year ahead . Interestingly , the wider construction sector has seen a historic drop on net balance for the past year with 30 % on net balance suggesting that sales have reduced in the last year .
Capital Investment has seen a fall during the year for CAB members and whilst members are optimistic about further investment in the year ahead , the dominant investment is seen to be in Plant and Equipment . This investment is likely to ensure that processes remain as efficient as possible and reduce wastage .
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10 DECEMBER 2021 CLEARVIEW-UK . COM