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Mainstream Building In Decline

Posted: 08/02/2006

The Construction Industry hopes Government investment will reverse last year’s decline in output, according to the Construction Industry Trade Surveys published by the Construction Confederation and the Construction Products Association. The subdued performance during the final quarter of 2005 confirms industry estimates that last year marked the first annual decline in construction output since 1994.

But current uncertainties in the NHS hospital programme and transport infrastructure investment, coupled with growing pressure on public finances means that industry pessimism could prove justified.

Commenting on the findings, Michael Ankers, Chief Executive of the Construction Products Association said: “A weakening in private sector activity, especially in consumer and housing market related areas, appears to have dampened overall construction product sales during the fourth quarter with lower heavy side sales offsetting continued growth in light side products".

"In addition construction product manufacturers are facing a widespread rise in unit costs, driven by higher raw material and energy prices. Prices for gas and electricity have typically doubled over the last 2 years and for some companies the situation has been even worse. Raw material prices for many companies have also increased significantly, particularly those where the material has been affected by the sharp increase in oil prices. These cost pressures have squeezed manufacturers’ margins and are filtering through to selling prices.”

Speaking on behalf of contractors, Stephen Ratcliffe, Construction Confederation chief executive said: “Clearly, the sustained growth enjoyed by the industry in recent years has weakened. While there is still a general optimism about future prospects, the outlook is more subdued and contractors’margins are under pressure through rising labour and materials costs.

Both heavy and light side manufacturers have seen widespread increases in raw material and energy costs, with 29% of manufacturers reporting that their unit costs have risen by over 5% during the last year and over a fifth of manufacturers increasing their domestic selling prices by over 5%.

Over three-quarters of contractors report that material prices costs have risen over the last 12 months. However contractors report that upward pressure on site labour costs eased slightly during quarter, with on balance 58% reporting labour costs had risen over the last year, compared to four-fifths in the previous survey. In addition there was a widespread improvement in the availability of skilled site labour, including bricklayers, plasterers and carpenters.

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