Construction material prices rise sharply

The construction industry is likely to seem bleak during 2011 thanks to sharp increases in construction material prices on top of falling workloads.

That’s according to the latest survey from the Construction Products Association which found that product manufacturers and contractors are all anticipating sales and workloads to decline in 2011 due to economic uncertainty and falls in public spending.

CPA economics director Noble Francis said: “The Construction Trade Survey for 2010 Q4 highlights the effect of the poor weather in November and December, which combined with falling demand across the industry and sharp rises in costs during 2010, such as the 46% price increase in copper and 80% in iron ore, are exacerbating problems for the industry.”

Key survey findings are:

  • Fewer than 10% of building contractors reported problems recruiting on-site labour in 2010 Q4

  • 90% of light side firms and 53% of heavy side firms stated that employment fell in the fourth quarter of 2010

  • Only 46% of building contractors reported that they were operating at between 90% and full capacity in 2010 Q4

  • 47% of light side manufacturers and 61% of heavy side manufacturers reported that rising raw materials costs had led to a rise in manufacturing costs in the fourth quarter of 2010

  • Only 4% of specialist contractors reported being paid within 30 days but 3% of specialists paid in over 90 days during 2010 Q4

  • 81% of light side manufacturers reported a rise in investment in product improvement and 64% reported a rise in investment in plant and equipment in the fourth quarter of 2010

    Francis said: “Although January will see a slight upturn due to a degree of ‘catch-up’ work lost during the poor weather in Q4, this is likely to be shortlived and firms across the whole industry are pessimistic looking forward. We have not yet seen the full impact of the public sector spending cuts and without a considerable improvement in private sector construction, a recovery in the industry as a whole will be delayed; as construction accounts for around 9% of GDP, this will inevitably hinder growth for the economy during 2011.

    Julia Evans, chief eecutive of the National Federation of Builders said: “Given that the full extent of the government’s spending cuts has yet to work its way through the system, the combination of less work, rising material prices, lower margins, continued lending restrictions and a rise in VAT could not have come at a worse time. Companies can only battle these conditions for so long. With the rate of construction insolvencies exceeding that of other industries, the impact on our skills base will be devastating.”

  • About Fiona Russell-Horne

    Group Managing Editor across the BMJ portfolio.

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