The Construction Products Association’s latest State of Trade Survey – 2023 Q1.pdf highlighted the continued mix of fortunes in the construction product manufacturing industry. For a third consecutive quarter a fall in sales for heavy side producers contrasted with continued growth for manufacturers on the light side. Forward-looking sales expectations improved, however, but the strength of demand in construction remains the key concern for sales over the next 12 months.
In 2023 Q1, a balance of 7% of heavy side manufacturers reported that sales of construction products decreased, marking a third consecutive quarter of decline. For light side manufacturers 44% reported that product sales rose, which extended a run of growth that began in 2020 Q3.
Looking to the next 12 months, 46% of heavy side manufacturers and 47% of light side firms anticipated a rise in sales, although with demand cited as the key constraint on manufacturers’ near-term activity and continued inflationary pressure reported across a broad base of fuel, energy, raw materials and labour costs, the outlook remains tinged with uncertainty.
Rebecca Larkin, CPA Head of Construction Research said: “Heavy side manufacturers recorded another quarter of falling sales as the slowing economy and high construction cost inflation continued to lead to reticence over new project starts. Heavy rain and bad weather in both January and March will also have slowed down the external and structural works that heavy side products flow into. By contrast, interior and fit-out work that focuses more on light side products was able to continue largely unhindered and demand remains strong in any case, underpinned by large offices and commercial refurbishment projects.
“In terms of the economy, there was greater stability in Q1 following the post-Mini Budget turmoil at the end of 2022, which has improved manufacturers’ views for the 12 months ahead. The split in fortunes across construction is likely to continue, however, with housing and other consumer-focused sectors set for a struggle against a backdrop of falling real incomes and interest rate rises, whereas larger-scale refurbishment activity continues to be driven by energy efficiency considerations and new models of hybrid home-office working.
Key survey findings include:
- A balance of 7% of heavy side firms reported that construction products sales fell in Q1 compared with 2022 Q4, marking a third straight quarter of falling sales
- 44% of light side firms reported product sales rose, the eleventh quarter of growth
- 46% of heavy side manufacturers and 47% of light side firms anticipated a rise in sales over the next 12 months
- Half of heavy side manufacturers and 59% of light side manufacturers cited ‘demand’ as the key concern for sales over the next 12 months
- Overall costs are expected to increase over the next year according to balances of 62% on the heavy side and 80% on the light side
Overall, the Q1 survey illustrated how the variation in construction activity by sector impacts construction product sales. Strong activity in commercial refurbishment, energy efficiency improvements and fit-out work has resulted in a run of growth for light side product manufacturers spanning eleven consecutive quarters, whereas reticence to sign-off on new project starts and sharp rises in construction costs, combined with bad weather at the start of the year, continued to hold back heavy side sales.