Continuing increases in energy and materials costs have forced construction profit margin forecasts to drop to the lowest level since 2020, with Wales and the South West, followed by Scotland, expected to suffer the worst, according to the latest figures from the Construction Products Association.
The supply chain in the industry continued a strong upward trajectory into the first quarter of 2022 despite the conflict in Ukraine and inflation costs.
Data released from BEIS displayed materials prices rose by 21.9% in Q1 which was considerably outdoing UK CPI inflation, which itself is at a historic high. The primary factor for driving the increasing inflation costs were materials for SMEs and product manufacturers also reported an increase in energy and fuel costs across the board.
CPA senior economist Rebecca Larkin, said: “Inflation can be seen throughout the supply chain, starting with manufacturers’ input prices, and is particularly acute for energy-intensive heavy side firms, whilst data from BEIS has shown year-on-year increases of over 20% in construction products and materials prices since August 2021. It is, therefore, no surprise that materials were the key driver of SME builders’ costs in Q1.”
Key survey findings include:
• Product sales saw continued annual growth. In Q1, a balance of 55% of heavy side firms and 86% of light side firms reported that sales were higher than in 2021 Q1, when nationwide lockdown restrictions were reintroduced for most of the quarter.
• SME workloads rose in Q1. 45% of FMB members reported a rise in workloads, whilst 15% reported that their workloads had fallen.
• Workloads continued to grow for surveyors.
• Rise of costs for fuel, energy and raw materials still a huge factor for costs across the industry
• Infrastructure orders increased in Q1. Although order books for civil engineering firms continued to grow in annual terms across Great Britain, the balance edged down from a seven-year high of 51% in 2021 Q4 to 40% in Q1.
In general, despite the increased pressure of higher costs and inflation, the construction products manufacturing industry has seen a strong start to Q1. Growth in sales is expected to continue during 2022, albeit alongside further upward pressure on input prices.
