Material prices rise but recovery stagnates

Published:  15 February, 2011

LONDON: Sharp increases in material prices during the final quarter of 2010 exacerbated problems created by falling workloads, according to the latest Construction Trade Survey.

Building product manufacturers and contractors anticipate that sales and workloads will decline in 2011 due to economic uncertainty and falls in public spending.

Noble Francis, economics director at the Construction Products Association said: "Although January will see a slight upturn due to a degree of 'catch-up' work lost during the poor weather in Q4, this is likely to be short-lived and firms across the whole industry are pessimistic looking forward. "

He said the full impact of the public sector spending cuts has not taken effect yet and recovery in the industry as a whole will be delayed.

"With 70% of light side manufacturers and 56% of heavy side manufacturers experiencing a fall in sales in Q4 compared to a year ago along with 22% of building contractors also reporting a fall, there is great uncertainty regarding economic activity during the coming year," Francis said.

Julia Evans, chief executive, National Federation of Builders added: "Given that the full extent of the government's spending cuts has yet to work its way through the system, the combination of less work, rising material prices, lower margins, continued lending restrictions and a rise in VAT could not have come at a worse time. Companies can only battle these conditions for so long. With the rate of construction insolvencies exceeding that of other industries, the impact on our skills base will be devastating."

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