UK Construction Manufacturers Expect Production Rise in 2019

CONSTRUCTION products manufacturers ended 2018 with a stronger performance than it started with according to the Construction Products Association’s (CPA) State of Trade Survey for 2018 Q4.

Manufacturers reported an increase in product sales and continued optimism for the industry as it looks ahead to an uncertain 2019. The survey reveals that product manufacturers reported further increases in sales during the quarter, despite weather-related weakness seen at the beginning of 2018.

Production Rise in 2019

For heavy side manufacturers, a balance of 27% of respondents reported that sales increased, whilst on the light side, half of 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 light side firms expecting an increase in sales in the January-March period.

Although construction manufacturers expect a positive outlook in 2019, cost pressures will likely remain raised. 90% of heavy side firms and 83% light side firms 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.

Hazy Outlook

Rebecca Larkin, Senior Economist at the CPA

Rebecca Larkin, CPA Senior Economist said, “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.”

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.