18th October 2022

The two-year run of sales growth for construction product manufacturers ended in Q3, according to the Construction Products Association’s latest State of Trade Survey. Furthermore, a slowdown in construction activity in the publicly financed and repair & maintenance sectors since Summer, as well as the deteriorating economic backdrop, underpin manufacturers’ expectations of a contraction for the year ahead.

In Q3, 12% of heavy-side manufacturers reported that sales of construction products declined, marking the first fall since the nationwide lockdowns in 2020 Q2. Alongside this, 17% of light-side manufacturers reported that product sales rose, which marked the lowest balance in two years.

In the Q3 survey, demand was viewed as the key constraint on manufacturers’ activity going forward. On balance, 53% of heavy-side firms, whose products tend to feed into the earlier stages of construction, anticipated a decrease in sales over the next 12 months. On the light side, a balance of 13% of firms anticipated a decline, marking the first negative view since the height of the Covid-19 disruption in 2020.

Rebecca Larkin, CPA Senior Economist, said, “The easing in manufacturers’ sales and the emerging weakness in construction output in Q3 is now joined by broader deterioration in the UK economy. High inflation continues to erode household finances and take big chunks out of project budgets, at a time when markets have reacted badly to the new Chancellor’s early fiscal plans and knocked confidence and growth prospects even further.”

She also added, “With a recession on the cards for 2023, it should come as no surprise that construction product manufacturers are anticipating a contraction in sales and activity. This combines with the strong rates of input cost inflation that already pervade the supply chain and have begun to delay decision-making on construction projects. Hopefully, some of the unanswered questions around the government’s spending plans will be resolved in the coming months and help to lift the cloud of uncertainty hanging over our industry.”

Key survey findings include:

A balance of 12% of heavy-side firms reported that construction products sales fell in Q3 compared with Q2, ending eight quarters of growth
17% of light side firms reported product sales rose, the lowest balance since 2020 Q2
53% of heavy-side manufacturers and 13% of light-side firms anticipated a decrease in sales over the next 12 months
Fuel costs rose for all heavy side and light side manufacturers; energy costs rose for 94% of heavy side firms and 96% of light side firms
Overall costs are expected to increase over the next year according to balances of 82% on the heavy side and 61% on the light side
Weakness in hiring intentions was reported by both heavy-side and light-side manufacturers

Overall, the Q3 survey demonstrates the impact of existing inflationary pressures combined with early signs of a deterioration in the economic situation, leading to a decline in construction product manufacturers’ sales and forward-looking expectations.

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