Construction products sales increase for Q2

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Sales of construction products increased significantly during Q2 of this year according to a recent UK study.

The Construction Activity Barometer from Ernst and Young and the Construction Products Association (CPA) produced an overall result of 77 where anything below 50 represented a fall in sales and 50 meant no change.

The study suggested conditions for product manufacturers were improving, though experts warned firms to be cautious, the comparison being drawn against figures of 12 months ago when sales were at a historic low.

Commenting on the results in light of recent UK spending cuts, which could have a detrimental impact on the GCC, the CPA's economics director Noble Francis said: “This latest survey illustrates that the situation for the construction products industry is substantially better than it was one year ago but, with major public spending cuts looming, manufacturers fear that sales will fall sharply once again.

“With government capital expenditure set to be cut by £100 billion over the next five years there is a real danger that any recovery in the construction industry will be delayed. This would seriously impact upon manufacturers and suppliers of construction products, holding back a return to growth in the wider economy.”

Broken down, the results showed how heavy side manufacturers’ sales rose to 79 in Q2, the highest level since Q2 2007, while light side manufacturers also produced a high score of 66.

Looking ahead, the majority of construction products manufacturers expect their sales to continue to rise in Q3, compared with the same quarter one year earlier.

Dominic McAra, Ernst & Young’s Construction Products team director said: ‘It is good to see confidence returning - although the comparison is to a bad quarter 12 months ago and is after a tough January / February 2010. This increased confidence has also been reflected in the return of transaction activity to the sector - even if this is still at a more subdued level than pre-recession.

“The next six to twelve months will generate a challenge for the sector as the proposed capital cut backs take effect.

“Those companies with a restructured cost base, and re-financing in place, will be in the best position to deal with these challenges whilst still taking advantage of any private sector recovery. Others may have to approach the next few months with more caution.”