UK construction sector shows continuing signs of weakness

The UK construction industry continued to display signs of weakness in the second quarter of 2019, according to a survey of the supply chain’s product manufacturers, contractors, civil engineers and SME builders.  

The survey, conducted by industry body the 3742 Construction Products Association (CPA), found that growth in the sales of construction products during Q2 was reported by 20% of heavy side manufacturers and only 9% of light side manufacturers. Only 5% of civil engineering contractors and 4% of SME builders reported an increase in workloads during the quarter. In addition, hiring fell among SMEs and was the lowest in six years for product manufacturers.

Growth was reported in orders, enquiries and anticipated sales, however, raising hopes that the supply chain’s near-term outlook is positive. Fifteen per cent of civil engineering firms reported a rise in new orders in Q2 and 13% of SMEs reported an increase in enquiries, on balance.

A balance of 2% of SMEs reported a fall in employment during Q2, whilst only 13% of heavy side manufacturers reported an increase.

Overall costs increased for 87% of civil engineering contractors, whilst 94% of heavy side product manufacturers reported a rise in raw materials costs.

Rebecca Larkin, senior economist at the CPA, commented: “Forward-looking indicators in this quarter’s survey show that on the surface the construction industry has retained some of its optimism as we approach another possible Brexit date. Underneath this, however, there appear to be clear question marks over confidence, with hiring at its lowest level in six years among manufacturers and SMEs and a continued grappling with the rising costs of raw materials and wage bills.”

Brian Berry, chief executive of the Federation of Master Builders, added: “Years of Brexit uncertainty have resulted in construction bosses starting to change how they employ their workforce. To ensure their firms are ready for any economic shock-waves later this year, employers are reducing their number of direct employees and relying more on sub-contractors who are easier to shed if work dries up.

"The construction industry has always used a significant proportion of subbies but the fact that direct employment is decreasing, points to Brexit nerves among construction bosses. This is the reality on the ground of what happens when years of uncertainty are inflicted on the construction industry. Furthermore, apprenticeship training has taken a hit as construction bosses are reluctant to take on young people when they can’t be sure of future projects going ahead.”

Alasdair Reisner, chief executive of the Civil Engineering Contractors Association (CECA), welcomed the fact that the market bounced back in 2019 Q2 after two disappointing quarters but added that the infrastructure market remains fragile.

"There is nowhere near the level of growth we would expect from projected levels of investment, at a time when the UK should be redoubling its efforts to deliver strong economic growth ahead of Brexit,” Reisner said.