Construction Activity in Q1 2023 Higher Than Predicted

THE CONSTRUCTION LEADERSHIP COUNCIL (CLC) says construction activity in the first quarter of 2023 has been higher than what was predicted in Q4 2022.

While housebuilders do not anticipate 2023 sales will reach 2022 levels, consumer confidence is holding, aided by an easing of interest rates for 5-year fixed rate mortgages. New build reservations and sales have also improved against Q4 2022.

This is in line with the forecast from the Office of Budget Responsibility, with the UK predicted to avoid recession and inflation predicted to fall from 10% to 3% over the course of the year.

In its latest statement on the availability of construction materials, the CLC says despite higher than expected demand, there is good availability for the vast majority of building products.

The one exception is plasterboard which is currently on allocation. However, with measures in place to increase capacity, this is unlikely to be a long-term issue.

Bricks and Blocks

Longer standing issues with bricks, blocks appear to be resolved. The CLC says UK brickmakers have made significant investments in increased production. The first new line coming on stream later this year will add over 185 million more bricks a year.

Heating

Boiler volumes have also returned to normal levels, backlogs have been cleared and no further problems are foreseen.

Solar

The electro-technical sector continues to experience delays in the delivery of solar PV equipment and LED lighting which remain affected by the supply of semi-conductors.

Although wholesale gas prices are now falling, the price of energy intensive products such as bricks is unlikely to reflect this for some time as manufacturers hedged their gas prices last autumn. Manufacturers are also subject to other inflationary pressures including staffing and materials.

Timber

Timber prices have now returned to around pre-Covid levels. The CLC says it has also seen reductions for structural steel and rebar during the first quarter of 2023.

Overall, price inflation remains the number one issue. In the statement, the CLC said: “While prices are not rising as quickly as they have been, they are still substantially higher than 18 months ago and profit margins are being squeezed. This is particularly concerning for SME builders and regional house-builders.

“There are also isolated reports of credit risk insurance being withdrawn, which we will continue to monitor.”

The Construction Product Availability working group statement comes from its co-chairs, John Newcomb, CEO of the Builders Merchants Federation and Peter Caplehorn, CEO of the Construction Products Association.

>> Read more about construction activity in the news