The Construction Products Association Autumn forecasts reports states that construction output remains on forecast to fall by 6.8% during 2023. The two largest construction sectors contributing to this fall is private new housing and private house repair (r&mi), maintenance and improvement. In 2024 the forecast is for a further drop of 0.3% in construction output. The reasons given for the slowdown is the UK’s slower economic growth and high interest rates. A recovery in private housing and new build and r&mi is not due until 2025.
Meanwhile the CAB Q3 State of Trade Survey (SoT) demonstrates that aluminium fenestration seems to have remained reasonably buoyant during 2023 with members remaining busy and positive about historic sales and future demand.
This can be attributed to at least two factors. Firstly, some projects already out of the ground will continue to be built with fenestration requirements lagging from starts by eighteen months to two years. Secondly, the growth in aluminium in the home improvement market continues apace as households with greater disposable income improve using aluminium based products as opposed to the use of other materials. Reviewing any fenestration trade magazine today emphasises the interest in aluminium. Commercial and Industrial output remains strong which is where aluminium fenestration products are traditionally used.
‘Historic Sales Volume’s have dipped for Members of CAB, for the first time in the last twelve months. This follows the wider construction output reporting a drop of -47% on net balance in the Q2 2023. The annual drop in historic sales for Members is just -5% on net balance, but nevertheless, indicates a crucial drop in demand. CAB Members remain much more positive about trade than the wider construction supply chain.
‘Expected Sales Volumes’ reported by Members has decreased significantly from a high of 77% on net balance in Q1 2023 to -6% on net balance forecast for the last quarter in 2023. Important to note that the Membership still see the full year ahead as a positive growth with 39% on net balance indicating sales growth into 2024. This is favourable against the slight drop in forecasted sales from the construction supply chain of just -6% on net balance.
‘Sales Volumes – Quarter-on-Quarter’ views are mixed with 37% of Members reporting no change between Q2 and Q3, 47% stating a drop in sales and only 16% reporting growth between the two quarters. ‘Sales Volumes – Year-on-Year’ are a little more polarised with just 11% of members stating no change, 48% stating a drop in sales and 43% reporting growth between the two years. With the years previous three quarters results showing growth in sales, the sales volumes again indicate a slowdown in demand.
‘Historic Unit Costs’, whilst softening during the last twelve months have risen in Q3 showing on net balance a greater increase than the wider construction supply chain for both quarterly and annual costs. Whilst aluminium costs have remained fairly level in the last six months, increases in labour costs will increase unit costs at the gate. There remains a crucial skills shortage in the fenestration industry as it carries an older demographic compared to other construction industries.
As expected, ‘Cost Factors’ indicate that 84% of Members on net balance report this as the greatest cost factor. This has remained constant throughout 2023 only superseded in Q4 2022 by ‘Energy Costs’. The rise in living costs and mortgages coupled with a skill shortage puts experienced people at a premium who can negotiate increases in salary.
It comes as no surprise that when we look to ‘Likely Constraints on Activity Over the Next twelve Months’ that we see 89% of respondents claiming that demand is the likely constraint on business moving forward. Whilst demand has always been at a high level over the last twelve months, this is its highest report figure to date.
Reported ‘Labour Costs’ remain high on net balance from Members, over twice that of the wider Construction supply chain, reinforcing the lack of an experienced labour pool.
Members ‘Capital Investment’ on net balance has reduced in the year ahead compared to the previous year. Only Customer Research’ shows an increase in spend for the year ahead.
The full report is available to CAB Members. Please contact me at CAB if you are considering joining CAB.