Contractors report falling orders in ‘mixed’ Q1

8 May 2019 | By Neil Gerrard

There was a ‘broad-based’ fall in new orders reported by main contractors and civil engineers during the first quarter of 2019, new figures have revealed.

The Construction Products Association (CPA) said the first three months of the year were mixed in terms of product sales, output and new orders, according to the results of its quarterly sounding of contractors, civil engineers, product manufacturers and SME builders.

Some 20% of main contractors reported a decrease in output during the quarter, while workloads were reported lower for 17% of civil engineering contractors and 7% of SME builders. Only product manufacturers and SME builders reported positive readings in forward-looking indicators, while main contractors and civil engineers reported falling orders.

By contrast, sales of construction products rose according to 54% of heavy side manufacturers and 29% of light side manufacturers.

Meanwhile, overall costs increased for 91% of civil engineering contractors, while 60% of main contractors, 85% of heavy side product manufacturers and 82% of light side manufacturers reported a rise in raw materials costs

Profit margins fell for half of main contractors during the quarter.

Rebecca Larkin, senior economist at the CPA, said: “The year opened with a mixed quarter of performance for construction. Confidence among consumers and businesses remains low and this has reduced the amount of work coming through to the two largest construction sectors, private housing and commercial, which require greater visibility over the economy’s future growth path to see projects get the go-ahead. By itself this raises concern over the extent to which the political stalemate over Brexit is affecting UK construction, but the risks are intensified when combined with the prevailing narrative of rising costs for labour, raw materials and fuel eroding contractors’ margins.”

Richard Beresford, chief executive of the National Federation of Builders, said: “Member reporting indicates bad news for the sector as material costs keep increasing while contractors’ order books continue to decrease. While companies can take steps to prepare their business for exit from the EU, the pace of progress by the government continues to affect confidence and highlights the need for greater certainty.”

Director of external affairs for the Civil Engineering Contractors Association (CECA), Marie-Claude Hemming, said: “We are concerned that the industry is experiencing a decline in output at a time when the Government should be taking steps to shore up the economy. A decline in growth will have ramifications for businesses and communities who rely on our members to deliver the world-class infrastructure the UK needs.”

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