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UK Construction Manufacturers expect rise in production in 2019

The construction products manufacturing sector ended 2018 with a stronger performance than it started with, as manufacturers reported a broad increase in product sales and continued optimism for the industry as it looks ahead to an uncertain 2019 says the Construction Products Association (CPA).

The CPA’s State of Trade Survey for 2018 Q4 reveals that product manufacturers reported further increases in sales during the quarter, recovering from the weather-related weakness seen at the beginning of 2018. For heavy side manufacturers, a balance of 27% of respondents reported that sales increased, whilst on the light side, half of the manufacturers also reported that sales rose, marking the strongest increase of 2018.

Growth in factory output is anticipated to rise further in the opening quarter of 2019, with 64% of heavy side firms and 38% of those on the light side expecting an increase in sales in the January-March period.

Although manufacturers expect a positive outlook in 2019, cost pressures will likely remain elevated. 90% of heavy side firms and 83% of those on the light side anticipate an increase in costs in 2019, linked to labour shortages driving wages higher, and previous Brexit-related currency fluctuations passing through into price rises for raw materials and fuel.

Rebecca Larkin, CPA Senior Economist said: “These results add further evidence that product manufacturing entered 2019 on a strong footing, driven by increased construction activity in the housing and infrastructure sectors. Reading between the lines, given the elevated uncertainty over the government’s Brexit strategy, manufacturers’ sales may have received a boost from precautionary, near-term stockpiling further down the supply chain, and this is also likely to have contributed to the optimism over what is an otherwise hazy outlook.

“Raw materials and wage bills drove input inflation during Q4 and with a large proportion of manufacturers anticipating further cost rises this year, political confirmation of future trading conditions for materials and component imports will help in dispersing some of the uncertainty currently clouding the supply chain’s planning.”

Key survey findings include:

  • A balance of 27% of heavy side firms and 50% of light side firms reported that construction product sales rose in the fourth quarter of 2018 compared with the third quarter.
  • On an annual basis, sales also increased for 55% of heavy side and 21% of light side firms
  • On balance, 64% of heavy side manufacturers and 38% of light side manufacturers anticipated a rise in sales in the next quarter
  • Overall annual cost increases were reported by 80% of manufacturers on the heavy side and 74% on the light side
  • Over the next year, 90% of firms on the heavy side and 83% on the light side expect costs to rise
  • Raw materials costs rose according to 82% of heavy side manufacturers and 74% of those on the light side
  • Wages and salaries costs were reported higher for a balance of 82% of heavy side firms and 94% on the light side, a record high.

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