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Construction activity grows for eighth straight quarter

Construction activity grew for the eighth consecutive quarter in Q1 2015, driven by increasing workloads in private housing, commerical and infrastructure.

Growth in workload and sales was most pronounced for large contractors, with 50 per cent reporting an increase in output compared to a year earlier, according to the Construction Products Association (CPA) State of Trade Survey for Q1 2015.

This was higher than the 44 per cent that reported growth in output during Q4 2014.

A further 25 per cent of contractors reported that new orders increased in the private commercial sector, the highest balance recorded in the survey since 2004.

On top of this, 54 per cent of contractors reported growth in private housing during the quarter.

Contractors reported falling outputs for repairs and maintenance in both the housing and non-housing sectors.

For SMEs, a net balance of 19 per cent reported an increase in workload compared to a year earlier during, up from 17 per cent in the previous quarter.

Only civil engineering firms saw a decline, with only 29 per cent of these contractors reporting an increase in output during Q1 compared to a year earlier.

This was lower than the 52 per cent reporting an increase in the previous quarter.

Looking forward, 46 per cent of specialist contractors reported a rise in new enquiries in Q1 2015 - up from 15 per cent in Q4 2014.

Similarly, SMEs saw an upturn, with 29 per cent reporting an increase in enquiries in Q1 - up from just 2 per cent in the previous quarter.

But while work has continued to grow, the industry has felt the impact of rising labour and materials costs.

Half of large contractors reported increased tender prices in Q1, but a balance of 11 per cent experienced falling profit margins.

No specialist contractors covered by the survey saw an improvement in profit margins during the quarter.

Building costs were higher than the previous quarter for 81 per cent of building contractors, while for civil engineering contractors, 87 per cent on balance said that costs were higher compared to the same period a year earlier.

Similarly, 81 per cent of large contractors said that materials costs had risen during the quarter, up from 68 per cent in Q4 2014.

On top of growth in materials costs, 63 per cent of firms, on balance, reported labour costs were higher in Q1, higher than the 57 per cent recorded in the previous quarter.

Commeting on the survey, Stephen Ratcliffe, director at the UK Contractors Group (UKCG), said, “The continued growth in construction reported by the latest survey is encouraging, and hopefully the clear general election result will help minimise any impact on work pipelines.

“Rising costs continue to reflect skills shortages, and the need to focus on recruiting and training new people into the industry.”

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