Contractors fight for margin amid rising costs

6 November 2018 | By Neil Gerrard

Contractors are struggling to maintain margins amid rising materials and labour costs, despite “modest” growth in the third quarter of 2018.

That’s according to the latest Construction Trade Survey by the Construction Products Association.

The survey found that during the quarter, 25% of main contractors, 16% of SME builders and 10% of civil engineering firms reported an increase in activity. Output was reported lower for one-third of specialist contractors.

Profit margins fell for 7% of main contractors and one-third of specialist contractors in Q3.

Contractors are struggling to maintain profit margins in the face of further rises in cost, the survey found. On balance, 80% of main contractors reported a rise in materials and labour costs, 90% of product manufacturers reported an increase in fuel costs and cost rises for civil engineering contractors reached a three-year high.

Meanwhile, new orders and enquiries logged in Q3 indicated that the drivers of growth in the next 12 months will be restricted to private housing, repair and maintenance, and infrastructure.

Commenting on the survey, Rebecca Larkin, Senior Economist at the CPA, said: “The industry looks to have maintained some of the momentum from its catch-up in the second quarter. However, beneath the top-level growth rate, firms throughout the supply chain are grappling with a narrowing base of activity led by private housing and infrastructure work and rising costs for labour, raw materials and fuel. This triple threat for input costs is placing a clear strain on contractors’ profit margins, worsening confidence in an already-heightened environment of risk aversion.”

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