Fourth consecutive quarter of construction growth but cost rises a key concern

The latest Construction Trade Survey, published today, shows that construction activity rose in Q1, the first time in six years that the industry has enjoyed four consecutive quarters of growth in activity. Firms across all areas of construction reported increased output including building contractors, SMEs, specialist contractors, civil engineers and product manufacturers.

Commenting on the survey, Dr Noble Francis, Economics Director at the Construction Products Association, said:

“Firms across construction reported rises in output during Q1 and increases in orders and enquiries clearly indicate that activity will continue to rise throughout 2014.

“Unsurprisingly, private new housing was the key driver of construction activity. On balance, 57% of contractors stated that sector output rose in Q1 compared with a year ago, a considerable rise from the 20% balance reported in 2013 Q4. In addition, output in commercial offices and retail, the largest construction sector, rose for 22% of contractors, on balance, compared with a year earlier. This is a significant rise from the 8% balance reported just three months ago.

“Tender prices rose in Q1 but any boost from this is likely to occur when the resulting work hits the ground later this year. Currently, the key concerns are rising costs and skills availability in specific sectors such as private new housing. Overall, the industry reported that there weren’t serious problems recruiting construction trades. However, 61% of building contractors reported that it was difficult to obtain bricklayers during Q1 compared with 41% in Q4 and only 10% one year ago. A further 28% reported that they had difficulty recruiting carpenters in Q1, slightly lower than the 32% in Q4 but contrasting sharply with only 3% experiencing difficulties recruiting carpenters in just one year ago.”

Stephen Ratcliffe, Director UKCG, said:

“The encouraging news is that contractors have now reported four consecutive quarters of growth – with 16% of contractors reporting a rise in output during the first quarter. However, looking beneath this headline reveals that growth continues to be led by private housing, although new work within wider construction showed positive signs.”

Paul Senior, National Chair of the National Federation of Builders, added:

“Rising workloads and increases in future orders are good news, but behind those figures are areas of concern. Higher labour costs and a lack of available skills are a ticking time bomb that needs to be defused urgently otherwise, for many SMEs, the premiums attached to the cost of simply building will become unsustainable.”

Key survey findings include:

  • 57% of building contractors reported that, on balance, private new housing output rose during 2014 Q1 compared with 20% in 2013 Q4;
  • 22% of building contractors reported that, on balance, commercial offices and retail output rose during 2014 Q1 compared with 8% in 2013 Q4;
  • 11% of firms reported that, on balance, housing repair and maintenance output fell during 2014 Q1;
  • 47% of firms reported tender prices rose in 2014 Q1 versus only 2% in 2013 Q4;
  • 77% of building contractors reported that costs rose in 2014 Q1 compared with 63% in 2013 Q4;
  • 89% of firms reported rises in material costs in Q1, considerably higher than the 65% of firms reporting material cost rises in Q4;
  • 50% of firms reported rises in labour costs, higher than the 34% of firms reporting labour cost rises in Q1 and 7% at the start of the 2013;
  • 61% of firms reported that it was difficult to obtain bricklayers during the first quarter of 2014, compared with 41% in Q4 and 10% one year earlier;
  • 28% reported that they had difficulty recruiting carpenters in Q1, slightly lower than the 32% in Q4 but contrasts sharply with only 3% in 2013 Q1;
  • No specialist contractors reported only receiving payment after more than 90 days and 14% of specialists reported being paid within 30 days.