By Phil Slinger – CAB CEO
The recent Construction Products Association 2024 Winter forecast anticipates a further fall in construction output of 2.1% during the year ahead with a modest recovery of just 2% in 2025. Despite this forecast 40% of CAB members on net balance anticipate an increase in sales for the year ahead.
Unsurprisingly, output slowed across the construction industry in Q4 as the effects of the winter shutdown slowed construction. Private house builders reported a cut in demand of up to one-third, likely due to higher mortgages and are concentrating on completing existing sites rather than breaking new ground.
This optimism contrasts sharply against Q3 2023 Expected Sales Volumes where 6% of CAB Members on net balance expected a slowing in sales volumes for Q4. In fact, 33% of members on net balance reported a slowing in output during Q4. Furthermore, ‘Sales Volumes – Year-on-Year’ shows that 66% of members state their turnover is lower than a year ago, whilst only 20% state that their turnover is up by over 5%.
Optimism may be justified as overall the output levels remain strong in the infrastructure and industrial sectors, which may account for the positive outlook where aluminium fenestration is predominantly used. High end residential projects also continue to drive and grow aluminium fenestration sales in the home improvement sector. This activity is boosted by a strong refurbishment and fit out sector for existing buildings and the conversion of older buildings from commercial to residential applications. These are both markets where slim aluminium ‘heritage’ style windows are generally specified.
Costs continue to be under pressure with 67% of members on net balance expecting costs to increase again in the coming year. This is a rise from 45% in Q2. The expected rises in costs are above those of the wider construction industry. Over 2023 aluminium has continued to fall in costs but conflict in the Middle-East could have an influence on costs.
Throughout the past year the review of ‘Cost Factors’ confirms that wages and salaries are the major contributor facing members. This is closely followed by energy and fuel costs. The lack of an available experienced labour pool continues to drive salaries upwards as fenestration companies continue to try and retain staff and source experienced staff.
Lack of demand is the single greatest ‘constraint for members in the Likely Constraints on Activity Over the Next 12 Months’ graph with 73% of respondents citing this as a major concern.
The proportion of members operating at over 90% capacity remains at a low level, barely into double figures for the last three quarters, falling from 33% in Q1 2023. ‘Expected Capacity Utilisation’, operating over 90% capacity, for the year ahead is expected to be 33% of all members compared to just 24% for the wider construction industry.
Q4 sees an anticipated increase in ‘Labour Force’ for the year ahead by 27% on net balance of members. This has increased since Q2 and indicates some confidence in anticipated sales in the year ahead. Anticipated and past year ‘Labour Costs’ remain high with 73% of members on net balance expecting further increases, this has reduced from 84% in Q3.
‘Historic Exports’ have generally shown a decrease over 2023, likely due to the weak exchange rate. In Q4 60% of members did not export, with the largest sector 25% only exporting up to 5% of sales. 7% of members who responded continue to export over 15% of their sales.
Members capital investment has increased slightly in Q4 over Q3 with the major spend anticipated to be in new plant and equipment closely followed by investment in product development.
A slowdown in construction equating to just 2.1% will suggest a sluggish market in 2024 for aluminium fenestration. With new commercial starts slowing, often this is associated with building refurbishment which often includes new fenestration installation. With a reported slow start to the new year due to bad weather and storms it will be interesting to see results of the first quarter 2024.
Should you wish to learn more about the use of aluminium used in construction, please contact CAB directly, or why not consider joining the Association and be recognised as being involved in supporting your Industry and helping to shape its future. More information on our website at c-a-b.org.uk