UK construction industry continues to struggle

By Helen Wright09 April 2013

The construction industry in the UK continues to face tough conditions as poor weather in the first quarter has hit sales of construction products, while manufacturing and construction insolvencies are high.

According to the Construction Products Association’s latest State of Trade Survey, sales of construction products fell during the first three months of 2013 with poor weather exacerbating conditions for the industry.

And accountant PricewaterhouseCoopers (PwC) reported that there had been nearly 9,000 cases of insolvencies in construction and manufacturing since the second quarter of 2011, with over 1,000 insolvencies combined for both industries in the first quarter of this year.

Some optimism

But it’s not all doom and gloom, and the Construction Products Association survey did show that both heavy and light side product manufacturers expected a recovery in sales in the second quarter, on balance.

And PwC also said that, while still high, the rate of insolvencies for both the manufacturing and construction sector had at least slowed during the first quarter.

The Construction Products Association survey revealed that light side construction sales volumes contracted both year-on-year and on a quarterly basis, while heavy side markets remained depressed with sales falling both quarter-on-quarter and year-on-year, according to 39% of respondents.

Export sales continued to grow in the first three months of the year, with 21% of light and 15% of heavy side firms reporting higher export sales on a quarterly basis. Nevertheless, low demand is expected to hinder overall export sales growth in 2013 with raw material prices also cited as a likely constraint.

Overall a challenging year

Construction Products Association economist Milja Keijonen said, “Overall, 2013 is likely to be a challenging year for the industry but there are areas of optimism among the dark clouds.”

Meanwhile, the PwC figures showed that there was a 5% fall in construction insolvencies quarter-on-quarter for the first three months of 2013, from 658 to 625 nationwide. London remains the region with the highest number, 103 and over the two-year period has seen 977 insolvency cases overall.

Of the 5,500 overall construction insolvencies for the entire two year period, 1,488 involved general construction and civil engineering firms, and 378 involved architectural firms.

PwC engineering and construction leader Jonathan Hook said, “Any reduction in the number of insolvencies in the construction sector is welcome. The sector in the UK is still experiencing declining output year on year, however, so we are not necessarily over the worst yet in terms of insolvencies. There is an on-going cash squeeze throughout the supply chain as has been evidenced in recent reported results.

"The measures in the recent budget to support infrastructure, and in particular levels of house-building, are welcome but will take a little while to feed through into output.''

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