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Soaring Costs A Worry Despite Growth Signs

RISING material costs are a concern for 89% of companies responding to the latest trade survey from the Construction Products Association (CPA).
This issue somewhat tempered the positive news that construction activity rose in the first quarter of 2014, the first time in six years that the industry has enjoyed four consecutive quarters of growth in activity. Firms across all areas of construction reported increased output including building contractors, SMEs, specialist contractors, civil engineers and product manufacturers.
Dr Noble Francis, economics director at the CPA, comment: ‘Firms across construction have reported rises in output during Q1. Increases in orders and enquiries indicate that activity will continue to rise through 2014.
‘Unsurprisingly, private new housing was the key driver of construction activity. On balance, 57% of contractors stated that sector output increased in Q1 compared with a year ago, a considerable rise from the 20% balance reported in 2013 Q4.
‘In addition, output in commercial offices and retail, the largest construction sector, rose for 22% of contractors, on balance, compared with a year earlier. This is a significant rise from the 8% balance reported just three months ago.’
A cautionary note was struck by Paul Senior, national chair of the National Federation of Builders, added: ‘Rising workloads and increases in future orders are good news, but behind those figures are areas of concern.
‘Higher labour costs and a lack of available skills are a ticking time bomb that needs to be defused urgently otherwise, for many SMEs, the premiums attached to the cost of simply building will become unsustainable.’
Dr Francis conceded that the key concerns currently were rising costs and skills availability in specific sectors such as private new housing. He added that tender prices rose in Q1 but any boost from this would be likely to occur when the resulting work hits the ground later this year.
‘Overall, the industry reported that there weren’t serious problems recruiting construction trades. However, 61% of building contractors reported that it was difficult to obtain bricklayers during Q1 compared with 41% in Q4 and only 10% one year ago.
‘A further 28% reported that they had difficulty recruiting carpenters in Q1, slightly lower than the 32% in Q4 but contrasting sharply with only 3% experiencing difficulties recruiting carpenters in just one year ago.’
Stephen Ratcliffe, director UK Contractors Group, said: ‘Growth continues to be led by private housing, although new work within wider construction showed positive signs.’
Key survey findings include:
l 57% of building contractors reported that, on balance, private new housing output rose during 2014 Q1 compared with 20% in 2013 Q4;

22% of building contractors reported that, on balance, commercial offices and retail output rose during 2014 Q1 compared with 8% in 2013 Q4;
11% of firms reported that, on balance, housing repair and maintenance output fell during 2014 Q1;
47% of firms reported tender prices rose in 2014 Q1 versus only 2% in 2013 Q4;
77% of building contractors reported that costs rose in 2014 Q1 compared with 63% in 2013 Q4;
89% of firms reported rises in material costs in Q1, considerably higher than the 65% of firms reporting material cost rises in Q4;
50% of firms reported rises in labour costs, higher than the 34% of firms reporting labour cost rises in Q1 and 7% at the start of the 2013;
No specialist contractors reported only receiving payment after more than 90 days and 14% of specialists reported being paid within 30 days.
The Contract Flooring Association is affiliated to the Construction Products Association through the National Specialist Contractors’ Council (NSCC).
NSCC is among a number of organisations which participate in the CPA construction trade surveys. Others include the National Federation of Builders (NFB); the Civil Engineering Contractors Association (CECA); The UK Contractors Group (UKCG); and the Federation of Master Builders (FMB).

This article has been reproduced from the Contract Flooring Journal website. You can find them at www.contractflooringjournal.co.uk.