Construction industry activity to rise this year, but skills concerns continue

The latest Construction Trade Survey, published today, reports that construction activity rose for the seventh consecutive quarter in the fourth quarter of 2014. Firms across construction, from the largest contractors to SMEs, product manufacturers and civil engineers reported output growth in Q4, with further growth expected in 2015.

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

“Another quarter of growth confirms the construction industry’s strongest performance in six and a half years. Activity rose in the fourth quarter compared to a year earlier according to 44% of contractors, on balance, although this moderated from 60% reported in Q3.

“Increased activity was led by the private housing sector, in which 53% of firms, on balance, reported a rise in output. Output was also driven by private commercial, the largest construction sector, where 40% of firms on balance reported rising volumes of offices and retail work.

“Looking forward, contractors expect continued strength in private housing and commercial this year, boosted by public non-housing as a stream of work on the Priority School Building Programme gets underway. Outside of these sectors, however, order books weakened in Q4, suggesting a moderation in growth in 2015. SMEs in particular reported a noticeable slowdown in new enquiries in Q4.

“In addition, only product manufacturers felt the effects of falling oil prices in Q4. Contractors, SMEs and civil engineers continued to report elevated costs, which implies any gains from a wider slowdown in inflation are yet to filter down the supply chain.

“Ongoing difficulties in recruiting skilled on-site trades are also likely to keep upward pressure on costs. Amongst large contractors, 70% reported difficulties in recruiting bricklayers in Q4, up from 41% in Q3.”

Stephen Ratcliffe, Director UKCG, said:

“Recovery in construction is good news for everyone in the industry. Hopefully, possible political changes in the UK and economic uncertainty in the Eurozone will not damage the industry’s growth prospects. Cost pressures continue to be a worry largely reflecting skills shortages. That is why UKCG members are focussing their activities on attracting new people into construction.”

Richard Beresford, Chief Executive of the National Federation of Builders, added:

“While the industry is reporting broad-based growth and a strong pipeline of work, it is unable to capitalise on that. The rising costs associated with a shortage of skilled labour and for tenders are eliminating the profit advantage that increased workloads bring. With changes to procurement rules imminent, now is the time to see how we can remove unnecessary cost from the tendering process.”

Key survey findings include:

  • 44% of building contractors, on balance, reported that construction output rose in the fourth quarter of 2014 compared with a year ago
  • Private housing output rose in Q4 according to 53% of building contractors, on balance
  • 40% of building contractors, on balance, reported that private commercial output rose in the fourth quarter of 2014 compared with a year ago
  • 11% of building contractors reported a fall in housing repair and maintenance output in Q4, on balance
  • 12% of contractors, on balance, reported a rise in orders for private housing in Q4
  • Orders in the private commercial sector increased according to 9% of contractors, on balance
  • Public non-housing orders (education and health) increased in Q4 according to 16% of building contractors, on balance
  • 57% of firms reported labour costs rose and 68% of firms reported that materials costs rose in Q4 compared with the previous quarter
  • 70% of building contractors reported difficulties recruiting bricklayers in Q4 compared with 41% in Q3