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Construction industry growth continues but firms warn on labour and material costs

New data from the CPA’s Construction Trade Survey shows an increase in activity across all areas of construction during Q2, but highlights that rising costs may represent a significant barrier to future growth.

According to Construction News, all major areas of construction experienced growth, including building contractors, civil engineers and product manufacturers.

Building contractors continue to benefit from the increase in demand for private housing. The survey showed that 41 per cent of contractors reported private housing output was higher than a year ago.

Education and health sectors have also experienced growth, with 46 per cent of contractors reporting that output was higher than the previous year.

Construction Products Association economics director Noble Francis said: “Firms across construction reported rises in output during Q2 and the majority of the industry is expecting activity to rise over the next 12-18 months.

“The largest construction sector, private commercial, enjoyed an increase in activity with 37 per cent of contractors reporting that commercial output rose in Q2 compared with a year ago.”

Despite the positive results, rising materials and labour costs may restrict continued growth over the next year.

Mr Francis added: “Tender prices rose in Q2 and many major contractors are still working on projects won in 2013 at relatively low prices.

“But they have been suffering from the key concerns of rising costs and skills availability, especially in specific sectors such as private new housing.” 

According to the survey, three quarters of construction firms reported that labour costs were higher than a year ago, while 95 per cent of firms reported that materials costs had increased since last year. 

National Federation of Builders chief executive Richard Beresford said: “The good news is construction output is rising. However, higher tender prices, materials and labour costs and difficulty in securing skilled labour at reasonable cost all highlight the fragility of this recovery.” 

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