The latest Construction Trade Survey from the Construction Products Association (CPA), highlights that activity rose in the second quarter of 2014 (Q2) bacross all areas of construction, including building contractors, SMEs, specialist contractors, civil engineers and product manufacturers.  Future growth, however, may be put at risk by rising costs.

Commenting on the survey, Dr Noble Francis, the CPS’s economics directo, said:  “Firms across construction reported rises in output during Q2 and the majority of the industry is expecting activity to rise over the next 12-18 months.

“Unsurprisingly, private new housing was the key driver of construction activity.  On balance, 41% of contractors reported that private housing output rose in Q2 compared with a year ago.  The largest construction sector, private commercial, also enjoyed an increase in activity with 37% of contractors reporting that commercial output rose in Q2 compared with a year ago.  In addition, 46% of building contractors reported that work in publicly-funded education and health construction saw a return to growth, reflecting the recovery in capital investment in 2014/15 with less than a year to go to the next election.

“Tender prices rose in Q2.  Many major contractors are still working on projects won in 2013 at relatively low prices but have been suffering from the key concerns of rising costs and skills availability, especially in specific sectors such as private new housing.  Overall, 80% of building contractors reported, on balance, that costs rose over the past year; 95% reported that materials costs rose over the past year and 75% reported that labour costs rose over the past year.  In terms of skills, 47% of building contractors reported that bricklayers and carpenters were difficult to recruit.”

Stephen Ratcliffe, director at UKCG, 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.”

David Frise, chief executive of AIS FPDC, said:  “The good news is construction output is rising.  However, rising materials and labour costs will need to be reflected in tender prices. The difficulty in securing skilled labour at reasonable cost also highlights the need to tackle the urgent need to bring more skilled people into the fit out and finishing sector.”

Key survey findings for Q2 include:

  • 58% of firms reported tender prices were higher than a year ago;
  • 80% of building contractors reported that total costs were higher than a year ago;
  • 95% of building contractors reported materials costs were higher than a year ago;
  • 75% of firms reported that labour costs were higher than a year ago;
  • Profit margins rose for the first time since the financial crisis six years ago (according to 5% of building contractors);
  • 14% of specialist contractors reported being paid within 30 days, the highest recorded throughout the survey;
  • 47% of building contractors reported difficulty recruiting bricklayers and carpenters.