Construction product sales stabilise
Published:  02 April, 2010

UK: Despite the adverse weather conditions in January, construction product sales were broadly flat during the first quarter of 2010 compared to one year earlier, according to the latest Construction Activity Barometer from Ernst and Young and the Construction Products Association.

Product manufacturers are anticipating growth in sales in the second quarter of 2010. This quarter's overall result indicates that conditions for product manufacturers have generally stabilised.

However, there is a clear difference between the fortunes of heavy and lightside manufacturers.

Heavyside manufacturers were acutely affected by the adverse weather conditions earlier this year and experienced a further decline in sales, even though this was the most positive result in over two years.

Lightside manufacturers saw a significant rise in sales – the first positive result since the first half of 2008.

Both heavy and lightside manufacturers are expecting a rise in sales during the next quarter.

Commenting on the results, Noble Francis, economics director of the Construction Products Association said: "This latest survey reflects improved conditions for the construction products industry and can be partly attributed to the fiscal stimulus from government during the recession.

"The rest of 2010 and 2011 are likely to remain extremely challenging for the industry, in view of the threat of sharp cuts in public capital spending.

"Although there is a clear need to reduce the public deficit, government must ensure that it maintains investment in those areas such as transport, energy, housing and education which are most likely to encourage economic recovery and provide the basis for long term sustainable growth."

Dominic McAra, a director in the Ernst & Young's Construction Products team added: "Although the election and uncertainty of future public infrastructure spending are still making forward planning difficult - it is encouraging to see that manufacturers at least consider that sales volumes are stable.

"We have seen that a number of companies in the sector have addressed their cost base over the last year to reflect lower sales volumes and are therefore better placed to cope with these lower volumes than this time last year.

"We suspect there will be more restructuring over the next 12 months. It will perhaps be at a lower level as companies become cautious about endangering future capacity by cutting too deep.

"The challenge to the sector – without an improvement in sales volumes in the short to medium-term - is how it will be able to generate environmental improvements to its products and processes.

"A scarcity of investment funds may lead to some companies having to make choices about where to concentrate their innovation – possibly at the expense of less core activities. It will be the companies that use scare resources most effectively that will tend to innovate most effectively."

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