Good availability across all building products and regions, similar to pre-pandemic levels, remains since the CLC’s last report Construction Product Availability statement.
The statement from John Newcomb, CEO of the BMF, and Peter Caplehorn, CEO of the CPA, says this availability is largely driven by a continuing overall decline in construction activity and, therefore, product demand. The picture varies across different sectors and regions of the country with demand in some remaining steady or declining only slightly, while others are experiencing more challenging conditions.
Private housebuilding and infrastructure
However, with interest rates likely to remain around current levels well into 2024, consumer confidence is proving volatile in the short term. Based on current sales, one major housebuilder is forecasting a 25% reduction in the number of houses built in the current trading year.
Meanwhile cancellations and delays in infrastructure projects have weakened demand for primary asphalts, ready mix, sand and gravel, with rates of decline comparable to those last seen in 2009.
Builders’ merchants and manufacturers
Sales through builders’ merchants, which had been better than expected in Q2, have now entered a downward trend and volumes are not expected to pick up until Q3/Q4 2024. This is leading to price softening across most product areas, the exceptions being products requiring high energy input to manufacture, and plumbing/HVAC and electrical.
In line with the slowing market, brick, block and roof tile manufacturers are balancing ‘just-in-time’ production levels and stock on the ground as storage is now proving challenging. They are, however, keeping an eye on indicators to rebuild stocks when required.
The report also stated that hardening payment behaviours between Tier 1,2,3 and 4 contractors are only adding to market pressures, especially on smaller firms. Builders’ merchants, who provide a financial bridge between manufacturers and contractors, are experiencing slower payments from customers and more bad debts.
PAG members are also aware that some companies in the sector have experienced credit rating downgrades which are impacting credit limits and putting additional pressure on those businesses and the wider industry. Subcontractors complain that they cannot get credit insurance because of the negative assessment of their credit worthiness. With the rate of insolvencies and administrations in construction continuing to rise, an expanded access to insurance is an area that all construction sectors need to address.
Meanwhile, the critical issue of labour and skills shortages across UK construction persists, with concerns compounded by fears that any prolonged downturn will result in further job losses and a smaller supply chain that is less capable of meeting demand when the market inevitably returns to growth.