Construction Product Manufacturing Recovery Still in Early Stages

THE CONSTRUCTION Products Association’s Q3 2024 State of Trade Survey suggests that the recovery of the construction product manufacturing sector is still in the early stages.

In the third quarter of 2024, both heavy side and light side firms reported a quarterly increase in product sales volumes, set against a backdrop of under-used capacity and labour cost pressures.

In 2024 Q3, a balance of 55% of heavy side manufacturers reported increased construction products sales. This was the second consecutive quarter of growth, ending the prolonged period of contraction since 2022 Q2. Alongside this, 8% of light side manufacturers reported a rise in product sales.

Recovery Still in Early Stages

Despite growth over the quarter, heavy side sales were still lower than a year earlier. It reflects ongoing, and significant reductions in demand from the two largest construction sectors: private housing new build, and repairs, maintenance and improvement (RMI).

Manufacturers on both the heavy side and light side expected growth in sales over the next 12 months. Nevertheless, low use of capacity, continued uncertainty over future demand, and strong labour cost inflation even before the Autumn Budget increase in employers’ National Insurance Contributions, registered as three of the standout factors affecting business confidence.

Green Shoots of Recovery

Rebecca Larkin, CPA Head of Construction Research

Rebecca Larkin, CPA Head of Construction Research said: “The green shoots of recovery have emerged slowly over the last two surveys and appear fairly tentative so far.

“The sharp falls in construction activity in two key markets for product manufacturers – new build housing and housing RMI – as well as the cancellation of several large roads projects, have had a stark impact on manufacturing operations, with heavy side capacity reined in.

“Although a return to growth over the next 12 months was widely expected in the Q3 survey, low capacity utilisation, which tends to be due to mothballed production lines, can take time to restart.

“Wages and salaries registered as one of the primary drivers of input cost inflation in Q3. Subsequent announcements in the Autumn Budget of a 6.7% increase in the National Living Wage and the rise in employers’ National Insurance Contributions from next April will only add to headwinds as the construction and product manufacturing recoveries try to gain pace.”

Key Findings

Key survey findings include:

• A balance of 55% of heavy side firms and 8% of light side firms reported that construction products sales rose in 2024 Q3 compared with 2024 Q2
• Comparing 2024 Q3 with 2023 Q3, 27% of heavy side manufacturers reported a decrease in sales, on balance
• 80% of heavy side manufacturers and 50% of light side manufacturers anticipated a rise in sales over the next 12 months
• 83% heavy side manufacturers and 42% of light side manufacturers cited ‘demand’ as the key concern for sales over the next 12 months
• Heavy side manufacturers reported capacity utilisation at 80% or lower, the first time below this threshold in the survey’s history
• All heavy side manufacturers and two-thirds of light side manufacturers reported an increase in wages and salaries compared to a year earlier.

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