Despite construction firms recording a twelfth consecutive quarter of growth in the first three months of 2016, sentiment about the year ahead is being dampened by uncertainty in the lead-up to the EU referendum on 23 June.
This is being fuelled by weaker order levels from industry clients that are postponing or cancelling projects.
The Construction Product Association’s latest Construction Trade Survey, published today, paints a mixed picture for the year ahead, with increased sales reported by product manufacturers at the start of the supply chain, and a rise in workloads and output on the ground reported by main and specialist contractors and small builders.
Rebecca Larkin, Senior Economist at the CPA, said, “After a slowdown at the end of last year, firms throughout the construction industry experienced a stronger opening quarter in 2016.
“In spite of this, the clear theme for Q2 is uncertainty, with main contractors reporting lower orders in all sectors as projects are paused or postponed ahead of the EU referendum in June.
“Beyond that, firms continued to indicate that a shortage of skilled workers is the largest threat to construction activity over the rest of the year. Main contractors reported difficulties in recruiting bricklayers, carpenters and plasterers in Q1, whilst low availability of labour was also reflected in upward pressure on wage bills among product manufacturers and civil engineers.”
Suzannah Nichol, chief executive of Build UK, said: “There continue to be mixed messages in terms of growth; however, industry intelligence shows increasing levels of activity over the last quarter.
“Employers are experiencing both rising material and labour costs as they head towards maximum capacity and this continues to highlight difficulties in recruiting appropriate skills at all levels.”
Richard Beresford, chief executive of the National Federation of Builders, said, “Uncertainty over the outcome of the EU referendum and over the nation’s defining issue – housing – is reflected in slowing industry performance.
“While homes will continue to be built, as long as there is uncertainty over government policy, we will not be able to provide anywhere near the number of homes people need.”
Key survey findings
19% of main building contractors, on balance, reported that construction output rose in the first quarter of 2016 compared with a year ago
A balance of 38% of specialist contractors reported a rise in output during Q1
On balance, 13% of SME contractors reported increased workloads in Q1 compared to three months earlier
A balance of 13% of main contractors reported a decrease in orders in private housing and 42% reported a decrease in public new housing orders
25% of SMEs and 21% of specialist contractors reported an increase in enquiries in Q1, on balance
13% of civil engineering firms reported an increase in new orders in Q1, on balance
50% of main contractors reported difficulties recruiting carpenters, 40% for bricklayers and 36% for plasterers in Q1
Overall costs increased for 74% of civil engineers contractors, whilst 42% of main contractors reported labour costs rose in Q1 compared with the previous quarter
100% of heavy side product manufacturers reported that wages and salaries increased from a year earlier