Housing drives construction sector’s third consecutive quarter of growth
Published by Max Salsbury for 24dash.com in Housing and also in Development
New housing development has driven the construction sector’s third consecutive quarter of growth, the first time the industry has seen three back-to-back growth quarters in over five years.
The key findings for the construction trade survey for 2013’s Q4 include:
• Private and public new housing were the key drivers of construction growth in Q4 with balances of 20% and 32%, respectively.
• 15% of building contractors, on balance, stated that activity rose in Q4, though this was a notable drop from the 43% figure in the previous quarter.
• Building contractors reported activity drops of 13% and 15%, respectively, in housing repair and maintenance and non-housing repair and maintenance.
• 63% of building contractors reported that costs rose in Q4 versus 49% in Q3.
• A balance of 2% of building contractors reported that tender prices rose in Q4, although a balance of 14% reported that profit margins had continued to fall.
• A rise in exports over the next 12 months is expected by both heavy side manufacturers (45% on balance) and light side manufacturers (58% on balance).
• 34% of building contractors, on balance, reported increased labour costs.
41% reported difficulties recruiting bricklayers and 32% reported difficulties recruiting carpenters.
• 76% of specialist contractors reported receiving payments between 30-60 days in Q4; late payment ranks as the most important factor affecting their business.
Dr Noble Francis, economics director at the Construction Products Association, said: “The recovery, which started in 2013 Q2, continued, though risks remain. The rises in activity were slower than in previous quarters, and orders for new work similarly decelerated, potentially highlighting uncertainty amongst contractors as to whether the recovery would be sustained.
“Growth was driven by the housing sector, though this was partially offset by a drop in repair and maintenance work. Building contractors, SMEs and civil engineers reported rises in output, although Q4 levels were not as strong as Q3. Indeed, only product manufacturers saw activity levels higher in Q4 than Q3.
“Tender prices rose again this last quarter, especially for building contractors and civil engineers. These rises, however, were mitigated by growth in cost inflation, largely owing to increased labour, energy and transport costs. As a result, most contractors reported a fall in profit margins despite the improving demand over the past 12 months.
Julia Evans, chief executive of the National Federation of Builders, added: “These figures highlight the fragility of the construction industry’s recovery, which is being driven by house building. Ongoing investment and future prospects point to further growth for the construction industry as a whole but as the economy recovers, it is important for companies to be at least as vigilant about costs, cash flow and late payment as they were during the downturn.”