Construction output growing but rising costs a concern

A graph showing trends in building contractors' reported output
A graph showing trends in building contractors' reported output

Construction activity rose in the second quarter of 2014 across all sub-sectors but future growth may be put at risk by rising costs according to the Construction Products Association (CPA).


CPA’s latest Construction Trade Survey showed 80% of building contractors reporting, on balance, that overall costs had risen during the past year. This compares to 58% of firms that said tender prices were higher than a year ago.


95% of firms surveyed said they had seen an increase in materials costs and 75% reported higher labour costs over the same period.


Despite this firms across construction including building contractors, SMEs, specialist contractors, civil engineers and product manufacturers saw rises in output during Q2 and the majority of the industry is expecting activity to rise over the next 12-18 months.


Construction Products Association economics director Dr Noble Francis said: “Unsurprisingly, private new housing was the key driver of construction activity.”


41% of contractors reported that private housing output rose in Q2 compared with a year ago. Private commercial, the largest construction sector, also saw an increase in activity with 37% of contractors confirming a rise in output.


Dr Francis said the fact 46% of building contractors reported that work in publicly funded education and health construction saw a return to growth reflects the recovery in capital investment in 2014/15 with less than a year to go to the next election.


In terms of skills 47% of building contractors reported that bricklayers and carpenters were difficult to recruit.


UK Contractors Group director Stephen Ratcliffe said: “There are some mixed signals in these results showing that there is some way to go before full recovery in the sector. As we move towards the general election next year, UKCG will continue to stress to politicians on all sides of the political divide the need for a visible public sector pipeline of infrastructure investment and a steady flow of new projects.”

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