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Author: Tom Crane – Glenigan Economist (@TC_Glenigan)

The latest Royal Institute of Chartered Surveyors (RICS) UK Construction Market Survey (Q2 2014) neatly summarised the ever-evolving challenges faced by the industry as UK economic prospects continue to improve. 

Materials shortages were cited as the greatest factor limiting building activity, overtaking financial constraints which have, until now, consistently been highlighted as the largest issue facing construction. These factors have been converging over the last three quarters as investor confidence has improved and pressure on capacity has tightened.


As recently as Q3 2013, insufficient demand was still being cited as a greater hindrance than materials shortages - by the second quarter of this year it was the most benign factor apart from the weather. 

And it isn’t just the RICS signalling the alarm over material shortages. The Markit/CIPS Construction PMI has consistently reported rising delivery times for materials, particularly bricks and blocks given the initial surge in house-building output.

As if the rise in demand was in any doubt, the latest Construction Products Association (CPA) State of Trade Survey, covering Q2 2014, found that 100% of both heavy and light side manufacturers increased their sales over the last 12 months, with 90% of heavy side respondents saying sales had risen by more than 5%. The CPA expects this trend to continue, with no respondents expecting a fall in sales over the next year. 

This points to it being a perfect time for material manufacturers to invest and increase production; and the latest survey results suggest this has been taken on board.  A net balance of 45% of heavy side producers have upped their investment into plant and equipment over the last year and a balance of 60% reported positive investment intentions into plant and over the next 12 months. 

In a press release accompanying the report, CPA Senior Economist Kallum Pickering said:  “There are clear signals that firms are looking to capitalise on the positive growth outlook. Both heavy side and light side firms reported that capital investment increased across all areas of business and investment intentions over the next 12 months were equally positive.”

Indeed, it seems it was the sudden pace of the upturn that caught out contractors and suppliers. And it appears that haulage constraints are contributing at least in part to lengthening delivery times; hardly surprising when hauliers have been hanging on through five years of economic downturn.

However, national statistics compiled by the Department for Business, Innovation and Skills (BIS) suggest that after the initial shock in the second quarter of last year, supply and demand has returned to a rough balance, at least for bricks and blocks which have been most widely cited as being difficult to obtain.

With growth now settling to a sustainable level, driven by positive underlying drivers for both housing and non-housing work, Glenigan expects material supply constraints to ease.  

Solace may also be taken from the CPA’s latest survey, in which 37% of heavy side manufacturers reported that capacity utilisation is above 90% - a healthy, but no means unsustainable, level. Moreover, in 12 months’ time only 42% expect themselves to be above this threshold.

And what is seen by heavy side producers as the key constraint over the next 12 months? Almost a third of respondents, 29%, say capacity, but this is fairly evenly matched by the 24% seeing no constraint at all. But the biggest issue, according to 35% of respondents, remains the same as over the last few years: demand.

For a more detailed breakdown of the key issues surrounding material supply as the industry continues to move into recovery, download the latest Glenigan report, Post-recession Risks: Impact of material supply on industry growth.

PR contacts:

Kirsty Maclagan (Marketing and Communications Manager)
T: +44 (0)1202 786 842│E: kirsty.maclagan@glenigan-old.thrv.uk

Tom Crane (Economist)
T: +44 (0)20 7715 6297│E: tom.crane@glenigan-old.thrv.uk

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