Financial concerns hit construction’s largest sectors

News

  Posted by: electime      12th February 2018

The Construction Products Association’s Construction Trade Survey 2017 has revealed that the proportion of companies in the construction supply chain struggled with rising costs for raw materials, labour and energy has remained elevated in each quarter, last year.

The survey found that although activity continued to increase for main contractors, SME builders, product manufacturers and specialist contractors during the quarter, civil engineering firms reported the first fall in workloads in four years. Net balances for orders, enquiries and expected product sales for the year ahead weakened, and contractors reported lower orders in the commercial, infrastructure, industrial and public non-housing sectors. Combined, these sectors account for over 40 per cent of total construction output.

Rises in fuel and energy costs were prevalent among heavy side product manufacturers, reflecting the lagged impact of Sterling’s deprecation during 2016 on hedged commodity prices.

This, in combination with existing price pressures for raw materials and labour, has intensified the cost inflation passing through the supply chain.

Overall, costs were reported higher for 82 per cent of civil engineering contractors, whilst raw materials increased for 82 per cent of main contractors and 91 per cent of light side product manufacturers.

Commenting on the survey, Rebecca Larkin, Senior Economist at the CPA, said: The Q4 survey marked the fourth consecutive quarter of falling profit margins among building contractors. This combined with Carillion’s liquidation at the start of this year only emphasizes the financial strains exerted by a protracted period of rising costs passing through the supply chain. Falls in new orders reported in the four sizeable sectors of commercial, infrastructure, industrial and public non-housing add another downside to the outlook for 2018 given the early signs of slowing activity at the end of last year.

 


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