Growth Continues Against Mounting Cost Pressures

CONSTRUCTION SUPPLY CHAIN growth continued a strong upward trajectory into the first quarter of 2022, according to the latest trade survey from the Construction Products Association.

Bearing in mind the conflict in Ukraine and inflation costs, this is encouraging news for the sector. This is also a fair reflection of what was stated in the Construction Products Association earlier State of Trade survey.

Supply Chain Growth

In Q1, 43% of heavy side manufacturers and 50% of light side manufacturers reported that sales increased compared to 2021 Q4. For SMEs, activity was driven by new build housing and RM&I, which has proven to be one of the most resilient sectors within construction.

Data released from BEIS displayed materials prices rose by 21.9% in Q1 – considerably outdoing UK Consumer Prices Index (CPI) inflation, which itself is at a historic high.

The primary factor for driving the increasing inflation costs were materials for SMEs and product manufacturers also reported an increase in energy and fuel costs across the board.

Rebecca Larkin, CPA Senior Economist

Rebecca Larkin, CPA Senior Economist said: “Inflation can be seen throughout the supply chain, starting with manufacturers’ input prices, and is particularly acute for energy-intensive heavy side firms. Data from BEIS has shown year-on-year increases of over 20% in construction products and materials prices since August 2021. It is, therefore, no surprise that materials were the key driver of SME builders’ costs in Q1.”

Key survey findings include:

• Product sales saw continued annual growth. In Q1, a balance of 55% of heavy side firms and 86% of light side firms reported that sales were higher than in 2021 Q1, when nationwide lockdown restrictions were reintroduced for most of the quarter.
• SME workloads rose in Q1. 45% of FMB members reported a rise in workloads, whilst 15% reported that their workloads had fallen.
• Workloads continued to grow for surveyors.
• Rise of costs for fuel, energy and raw materials still a huge factor for costs across the industry
• Infrastructure orders increased in Q1. Although order books for civil engineering firms continued to grow in annual terms across Great Britain, the balance edged down from a seven-year high of 51% in 2021 Q4 to 40% in Q1.

In general, despite the increased pressure of higher costs and inflation, the construction products manufacturing industry has seen a strong start to Q1. Growth in sales is expected to continue during 2022, albeit alongside further upward pressure on input prices.

>>Read more about Q1 2022 construction data in the news