Suppliers to the building and construction industry are set to go from strength to strength in 2024, according to a new report.

Small and medium-sized firms in the sector achieved a score of 82 out of 100 in the latest Manufacturers’ Health Index, compiled quarterly by inventory software brand Unleashed. 

The index is calculated from a number of key performance metrics including sales, purchasing, and internal efficiencies that impact stocking levels and lead times across 16 manufacturing categories. A score of 50 points or more indicates that a sector is performing well against these metrics. 

Jarrod Adam, Head of Product at Unleashed, said: “Manufacturers in every industry category were hit by challenges from all directions in 2023 – including high inflation and rising borrowing costs.

“The UK is home to over 98,000 construction companies, many of which are SMEs that make a critical contribution to both the industry and the UK economy. 

“It’s clear from our index that firms have recovered well from the supply chain disruption – and high cost of materials – seen during the pandemic and its aftermath. The tough economic climate doesn’t appear to have dampened homeowners’ appetite for renovations because they recognise the long-term value they can have. 

“Our index also shows that lead times have dropped for building and construction, down to 17 days – below the national average of 20.

“However, the industry is facing high overstock levels at £364,502 – the highest of any industry, and well over double the average level of £141,397. This reflects the slowdown in bigger house building projects due to high borrowing costs and economic uncertainty.”

Looking ahead to the coming year, he added: “While the building and construction sector work to overcome costs and reduce their overstock levels, our analysis suggests that they are in a strong position to meet this demand because they have finely-tuned their inventory management processes.

“Of course, any improvements they make would put them on an even stronger footing in this highly-competitive and fast-moving sector.”

Overall, the UK manufacturing industry rebounded at the end of 2023, with 11 of the 16 categories studied scoring more than 50 health points in the Manufacturers’ Health Index – contributing to the average of 77. 

Top of the table were cosmetics and personal care, and industrial machinery, raw material and equipment, which both achieved a near-perfect score of 98. Office equipment and supplies was bottom of the table at just 18 points, followed by food at 30 and electronics and communication at 38.

Lead times have also more than halved from the 43 day average of 2022 to 20 at the end of 2023.

However, the legacy of the pandemic is still clear, with ‘just in case’ overstocking now a fixture for many businesses. In the latter part of the year, excess inventory levels grew to £141,397 compared to £119,183 for the same period in 2022.

Retail and consumer-centric manufacturers appear to have a better handle of their inventory compared to heavier industries like  building and construction or metal and fabrication where longer lead times are already more typical.