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Construction output continues to grow despite housing slowdown

60 per cent of building contractors reported that construction output rose in Q3 2014, compared to the same period a year ago, according to the Construction Products Association.

According to Construction News, the increase in output was the sixth consecutive quarterly rise, despite a slowdown in housing output - the first time this has happened since Q1 2008.

The association’s data shows that firms all across construction - including SMEs and major contractors - reported an increase in output for the third quarter.

11 per cent of contractors reported a fall in margins for Q3 compared to Q2, however, suggesting that rising costs are still having an effect on profits.

Materials costs both grew during the quarter, with 74 per cent of firms reporting a rise compared to Q2. Similarly, 68 per cent of firms reported a rise in labour costs over the same period.

The highest rates in output growth were in the commercial and industrial sectors, where 43 per cent and 41 per cent of contractors respectively reported growth between Q2 and Q3.

Growth in private housing output has continued to slow, but 35 per cent of contractors still reported that output had grown since the previous quarter. This is down from 57 per cent in Q1 and 41 per cent in Q2.

Commenting on the survey, Dr Noble Francis, economics director at the Association, said, “Construction firms reported growth once again in the third quarter of 2014, the sixth consecutive rise in activity for the first time in six and a half years. Activity rose in the third quarter according to 60 per cent of contractors, on balance.

“Construction firms also reported rises in forward looking indicators such as orders and enquiries, which clearly indicate that activity will rise throughout 2015. 

A rise in Q3 order books in private housing was reported by 15 per cent of contractors, on balance.

A further 13 per cent and 12 per cent of firms reported rises, on balance, in orders books across private industrial and public non-housing (education and health) respectively.

“The only dark clouds in construction were seen around margins, which continued to be hit hard.  Construction firms had to suffer rises in costs in Q3 once again and although tender prices also rose in Q3, the benefits of these tender price rises are only likely to be felt when the work from these contracts occurs in 2015.”

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