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The results of Construction Products Association’s latest State of Trade Survey suggest that the recovery of the construction product manufacturing sector is still in the early stages.
In the third quarter of 2024, both heavy side and light side firms reported a quarterly increase in product sales volumes, set against a backdrop of low capacity utilisation and labour cost pressures.
In 2024 Q3, a balance of 55% of heavy side manufacturers reported that sales of construction products increased. This was the second straight quarter of growth, bringing an end to a prolonged period of contraction since 2022 Q2. Alongside this, 8% of light side manufacturers reported a rise in product sales.
Despite growth over the quarter, heavy side sales were still lower than a year earlier. In fact, 27% of heavy side manufacturers reported a decrease in sales, on balance. This is due to an ongoing, and significant, reduction in demand from the two largest sectors of construction: private housing new build and repairs, maintenance and improvement (rm&i).
The majority of manufacturers (80%) on both the heavy side and light side expected growth in sales over the next 12 months.
Nevertheless, low capacity utilisation, continued uncertainty over the future strength of demand, and strong labour cost inflation, even before the increase in employers’ National Insurance Contributions announced in the Autumn Budget, registered as three of the standout themes affecting business confidence.
For 83% of heavy side manufacturers and 42% of light side manufacturers ‘demand’ was the key concern for sales over the next 12 months. In addition, heavy side manufacturers reported capacity utilisation at 80% or lower – the first time below this threshold in the survey’s history. All heavy side manufacturers and two-thirds of light side manufacturers reported an increase in wages and salaries compared to a year earlier
Rebecca Larkin, CPA Head of Construction Research, said: “The green shoots of recovery have emerged slowly over the last two surveys and appear fairly tentative so far.
“The sharp falls in construction activity in two key markets for product manufacturers – new build housing and housing rm&i – as well as the cancellation of several large roads projects have had a stark impact on manufacturing operations, with heavy side capacity reined in.
“Although a return to growth over the next 12 months was widely expected in the Q3 survey, low capacity utilisation, which tends to be due to mothballed production lines, can take time to restart.
“Wages and salaries registered as one of the primaState of Trade Survey - 2024 Q3.pdfry drivers of input cost inflation in Q3.
“Subsequent announcements in the Autumn Budget of a 6.7% increase in the National Living Wage and the rise in employers’ National Insurance Contributions from next April will only add to headwinds as the construction and product manufacturing recoveries try to gain pace.”
Key survey findings include:
