Investors still have an appetite for the sector. Photo courtesy Sir Robert McAlpine.
Decline slowing for construction product sales...
Published: 28 September, 2009
UK: The sale of construction products has continued to decline, despite the recent optimism in the housing sector.
According to the latest Ernst and Young/Construction Products Association Activity Barometer, the rate of decline is at a slower rate than previously reported. This indicates a slight improvement from the last quarter, which had returned the lowest figure ever recorded by the Barometer.
Companies in the industrial and commercial sectors are currently experiencing sharp falls in construction and are continuing to suffer more than those in other sectors.
The recession is also continuing for product manufacturers, the report shows, affecting both heavyside and lightside. This was despite a slowing of the destocking that was prevalent in the first half of 2009 and the anticipation that economic activity would return to growth in the third quarter of 2009.
Commenting on the results, Noble Francis, economics director for the Construction Products Association said: "The latest figures were a considerable improvement when compared to those reported in the second quarter of 2009. It reflects the recent improvement in the housing sector with house prices, mortgage approvals and housing starts all rising in recent months.
"Looking forward, manufacturers are still pessimistic but not as pessimistic as they have been over the last three quarters."
Manufacturers, he added, continued to anticipate further falls in sales in the final quarter of 2009 compared to a year earlier. "While economic activity appears to be returning to growth, this does not appear to be the case for construction or product manufacturing where output, order books and employment continue to fall," Mr Francis said.
Dominic McAra, a director in Ernst & Young's building products team added: "The slight improvement in the results this quarter seem to reflect a tough, but at least stable trading environment, allowing companies to plan for the future again.
"A number of companies in the sector now appear to have addressed their cost base and are better placed to cope with lower demand than they were 12 months ago.
"Many of the larger companies have secured medium-term funding, with the number of Rights Issues showing that investors still have an appetite for the sector.
"We are still seeing companies approaching the last quarter of 2009 and 2010 with caution, with many still anticipating a tough winter trading period."