Construction Product Manufacturing: Caution Remains for 2020
Author: ross sturley cimcig
The final quarter of last year proved to be a mixed performance for the construction products manufacturing sector, with an equal proportion of manufacturers reporting an increase or decrease in sales for both heavy side and light side products.
The Construction Products Association’s State of Trade Survey for 2019 Q4 reports that 43% of heavy side manufacturers each reported a rise or fall in sales compared to Q3. Heavy side products are typically used in the early, structural stages of construction. Sales of light side products, typically used in the later stages of building, were reported to have either increased or decreased by 36% of manufacturers.
Manufacturers retain a positive, yet cautious view for the next 12 months that will encompass the UK leaving the EU and negotiating trade agreements during the transition period to the end of December. On balance, 21% of heavy side firms and 29% of light side firms anticipated a rise in sales for the year ahead. This was combined with the majority of product manufacturers anticipating that headcount would remain unchanged over the same period.
Rebecca Larkin, CPA Senior Economist said: “The Q4 survey results provide a clear illustration of the varying levels of activity across sectors of construction and regions of the country. Those manufacturers reporting decreases in sales are likely to be feeding into private new house building and RM&I, where activity has slowed as buyers and homeowners pause to take stock of the economic situation and their personal finances. In contrast, manufacturers whose products are used in warehouses, infrastructure or hotels will be buoyed by a pipeline of projects.
Nevertheless, the high proportion of manufacturers citing demand as their key concern for 2020 and signs of a pause in hiring suggest that the cloud of uncertainty is yet to clear.”
Key survey findings include:
- 43% of heavy side product manufacturers reported that sales increased or decreased in the fourth quarter of 2019 compared with the third quarter, resulting in a zero balance.
- 36% of light side product manufacturers reported that sales increased or decreased in the fourth quarter of 2019 compared with the third quarter, resulting in a zero balance.
- On balance, 29% of heavy side manufacturers anticipated a rise in sales in 2020 Q1 and 21% expected sales to increase over the next 12 months.
- For light side firms, a balance of 38% anticipated an increase in sales in Q1 and 29% expected a rise over the next 12 months.
- A balance of only 8% of heavy side firms anticipated an increase in their labour force over the year ahead.
- Demand was cited as the factor most likely to constrain output over the next year, according to 71% of respondents on both the heavy side and light side.