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Post-pandemic construction recovery well underway but material cost and supply concerns mount

THE construction products manufacturing sector posted a fourth successive quarterly expansion in the second quarter of 2021, according to the latest Construction Product Association (CPA) state of trade survey.

Private housing, infrastructure and private housing repair, maintenance, and improvement (rm&i), in which activity remains firmly above pre-coronavirus levels, continued to be the main drivers of growth. Material cost inflation, however, remained a prominent feature and supply-side constraints were seen as the key concern for the year ahead.

In 2021 Q2, nearly two-thirds of heavy side manufacturers and 44% of light side manufactures reported sales had increased compared to Q1. With demand in private housing and private housing rm&i expected to be sustained by government stimulus and increased appetite for properties with more outdoor and office/study space, 67% of light side firms expected a rise in product sales in the year ahead.

On the heavy side, this balance (79%) was the highest in nearly eight years, reflecting work occurring on large infrastructure projects. Plans for hiring also remained on the table, with 61% of light side firms anticipating increasing headcount, the highest balance in seven years.

The supply of raw materials and components over the coming year remains the largest concern for manufacturers owing to bottlenecks in the global supply chain. Unsurprisingly, raw material prices followed next as a potential constraint for heavy side firms alongside demand, whereas labour availability concerns rose up the agenda for light side firms.

Amandeep Bahra, CPA Economist said: ‘The recovery of the construction products manufacturing industry is well underway, with manufacturers posting the fourth consecutive quarterly rise in product sales in 2021 Q2. Adding to this positive news were expectations of further growth in the year ahead and plans to hire.

‘However, with global supply chain woes lingering due to a lack of shipping containers and drivers, a record proportion of manufacturers cited the supply of materials and components as a major constraint on the 12-month horizon. Inevitably, this stoked concerns among heavy side firms over high raw material prices over the coming year.

‘As self-isolation and Brexit rules also bite, the industry’s long-standing issue over labour availability was a key risk for light side firms.’

Key survey findings include:

  • A balance of 63% of heavy side firms and 44% of light side firms reported that construction products sales rose in Q2 compared with the previous quarter, the fourth consecutive quarter of growth
  • On balance, 79% of heavy side firms and 67% on the light side anticipated a rise in sales over the next 12 months
  • 52% of heavy side firms and 45% of light side firms cited material/component supply as the factor most likely to constrain output over the next 12 months, the highest proportions on record
  • Demand was cited as a key expected constraint, according to 15% of heavy side firms and 32% of light side firms
  • On the light side, 16% of firms cited labour availability as their key constraint over the next 12 months, the highest proportion since 2018 Q4
  • On the heavy side, 15% of firms cited raw material prices as their key constraint over the next 12 months, the highest proportion since 2010 Q4
  • 61% of light side firms anticipated increasing headcount during the next 12 months, the highest balance in seven years.

The CPA represents the UK’s manufacturers and distributors of construction products and materials. The sector directly provides jobs for 373,000 people across 24,000 companies and has an annual turnover of more than £61.2bn.

The state of trade survey, conducted quarterly, provides insight into current and expected future industry trends. The survey analysis includes the use of ‘balance of respondents’ to assess survey results and identify trends. Balance of respondents is a percentage of firms reporting a rise less those reporting a decline. No weighting is given to allow for the extent of the change of the size of the firms involved.

Analysis is divided into heavy and light construction products. 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, 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 state of trade survey is one of a range of publications produced by the CPA, including the construction trade survey and construction industry forecasts.

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