Big builders report Q4 workload falls

Nearly half the country’s main building contractors and a quarter of building specialists saw falls in output in the last quarter of the year.

The sharp decline in fortunes at the end of last year was revealed in the latest industry-wide trade survey compiled by the Construction Products Association.

Reports of a sharp slowdown came as the latest Government figures for the end of last year confirmed construction output fell 0.3% in the fourth quarter.

In December alone construction shrank 2.8%, with both new work, and repair and maintenance contracting in this period.

For the whole of 2018 construction output only edged up 0.7% –  the lowest annual growth since 2012.

According to the CPA survey output, new orders and enquiries were reported lower by main building contractors, specialist contractors and civil engineering contractors in the last three months of last year.

Furthermore profit margins fell for 13% of main contractors and 40% of specialist contractors in Q4.

Key survey findings

– On balance, 46% of main building contractors and 25% of specialist contractors reported that construction output fell in the fourth quarter of 2018 compared with a year ago
– 3% of civil engineers, on balance, reported a decrease in workloads during Q4
– On balance, 25% of SME contractors reported increased workloads in Q4 compared to three months earlier
– Main contractors reported that order books were only higher in the housing R&M sector
– 8% of civil engineering firms reported a decrease in new orders in Q4, on balance
– 14% of SMEs reported an increase in enquiries in Q4, on balance; enquiries fell for 25% of specialist contractors
– Overall costs increased for 86% of civil engineering contractors, whilst two-thirds of main contractors, 82% of heavy side product manufacturers and 74% of light side manufacturers reported a rise in raw materials costs

But in a mixed picture for the supply chain, 55% of heavy side manufacturers and 21% of light side manufacturers reported growth, with 25% of SME builders also on balance reporting increased in workloads.

Main contractors’ order books for all new build sectors were reported to be lower in Q4, whereas order books for housing R&M were reported to have increased compared to the previous quarter.

Rising costs for raw materials continued to filter through the supply chain, as reported by two-thirds of main contractors, 82% of heavy side product manufacturers and 74% of light side manufacturers and combined with lower volumes of work, continued to squeeze profit margins for building contractors.

Rebecca Larkin, senior economist at the CPA, said: “Parts of the construction supply chain have clearly started to feel the effects of the falls in new orders since the EU referendum translating into reduced activity in sectors such as high-end residential, commercial offices and industrial factories.

“The uncertainty that precludes investment decisions in these sectors with a high upfront outlay may also be benefiting other areas of the supply chain.

“Product manufacturers’ optimism looking towards 2019 may be reflective of continued high levels of activity in buoyant regions outside of the South East, as well as an element of precautionary stockpiling on-site providing a near-term sales uplift.”

Brian Berry, chief executive of the Federation of Master Builders, said: “Mounting Brexit uncertainty is starting to have a tangible effect and the indicators are not good with almost half of builders reporting signs of a weakening housing market.

“Furthermore, a worrying one in five construction SMEs has had projects stalled in the past three months due to delays to loans, or loan refusals, from the banks.

“Together with ever-rising costs due to material price hikes and labour shortages, the headwinds are blowing in the wrong direction for the UK construction sector.”

From http://www.constructionenquirer.com/2019/02/11/big-builders-report-q4-workload-falls/

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Author: Ebenal Construction

Ebenal Construction is the process of constructing a building or infrastructure.Construction differs from manufacturing in that manufacturing typically involves mass production of similar items without a designated purchaser, while construction typically takes place on location for a known client.