The latest quarterly construction trade survey – covering members of the Construction Products Association, Build UK, the FMB, the NFB and the Civil Engineering Contractors Association – paints a mixed picture on future workload with declining Energy Company Obligation (ECO) contracts and the cancelled Green Deal dragging down the repair and maintenance sector.
The survey is compiled by the Construction Products Association.
In Q2 2015, the survey found that firms across the supply chain, including larger contractors, SMEs, specialist contractors, civil engineers and product manufacturers, all reported growth in activity, marking the ninth consecutive quarter of growth.
Continuing a trend since mid-2013, growth in output was led by the private housing sector, where 43% of firms, on balance, reported a rise in output.
Increased output was also reported in private commercial, the largest construction sector, where 18% of firms, on balance, reported rising volumes of offices and retail work.
But the survey also found that large contractors were experiencing a decline in repair and maintenance work in both housing and non-housing in Q2, with weakness in these sectors evident since Q4 2014 – largely as a result of government changes to the ECO.
The CPA says that the number of measures installed under ECO has dropped sharply since April 2015 and, for the year to May, was 46.1% lower than a year earlier.
Looking forward, large contractors reported that their Q3 orders for repair and maintenance work were declining – while activity in the sector is expected to be further constrained by the cancellation of the Green Deal, announced by the government in July.
The survey also contained worrying indications of skills shortages, rising wages and pressurised margins.
Shortages of skilled on-site trades were already apparent, with nearly half of large contractors in Q2 reporting difficulties in recruiting bricklayers (49%), plasterers (45%) and carpenters (50%).
Meanwhile, 57% of larger contractors, on balance, reported labour costs were higher over Q2, although this is slightly lower than the balance of 63% reported in Q1.
However, it seems that contractors are having difficulty in passing these costs on: just 8% of contractors reported increased tender prices in Q2, the lowest balance in 18 months. Around half of respondents (47%) reported that tender prices were unchanged in Q2.
The CPA’s commentary says: “With firms planning to increase headcount in anticipation of workloads picking up, the impact on costs is clear.
“Overall, cost rises have been kept muted by low global oil prices limiting rises in energy costs, but difficulties with the supply of labour mean that wage bills have been reported as the significant driver of construction cost inflation.”
