Exciting Growth but Skills Shortages Remain a Key Concern
August 2015

The latest CAB State of the Market figures for Q2, 2015 continued to highlight a positive long term outlook for the aluminium in building sector with a number of metrics showing signs of increased confidence after the May General Election. Concern over the availability of skilled workers persists, with wages and salaries again being the key drivers of cost inflation while encouragingly 86% net balance of respondents expected sales volume growth for the year ahead.
Headlines:

• 77% of CAB members, on balance, reported a rise in sales over the past year.
• Members reported that they anticipate sales rising over the next quarter (73%) and the next 12 months (86%).
• Costs continued to rise with 59% net balance reporting a rise in costs in the last 12 months (46% in Q1/2015) and 68% expecting a rise over the next year (50% in Q4/2014)
• Wages & salaries (82% net balance) were reported for the 5th successive quarter as the major cost factor closely followed by Raw materials (43%), with Fuel Costs (-14%) and Exchange rates (-19%) both negative on balance.
• 40% net balance of companies expected to operate at over 90% of capacity over the next 12 months (29% in Q1/2015)
• Headcount increase for the year ahead rose (73% net balance) compared to 40% in Q1/2015 but was ahead of the wider construction sector figure of 50% net balance.
• Demand (33%) and Capacity (24%) were once again factors ‘likely constraints on activity over the next 12 months’. Encouragingly 24% of respondents stated ‘No constraints’ (20% in Q1/2015)

Underlying the increased confidence has been the strength of capital investment intentions across all the metrics. In each of the quarters in 2014, there had been a greater commitment (or at least equal) to investment across all the metrics for the 12 months ahead and this has largely continued into 2015. The metrics being: Property, plant/equipment, customer research, R & D, Product improvement and e-business. The outstanding area was as in the previous quarter was plant/equipment (80% net balance) followed by product improvement (70% net balance) and e-business (70%) highlighting increased priorities in these areas.

With increased sales activity, inevitably almost, costs are rising with wages the biggest factor for the fourth successive quarter. The other key drivers were raw materials (43%) and taxes (32%). Fuel costs were negative on balance for the fourth successive quarter and interestingly Energy costs showed a drop from 33% net balance in Q1 to only 9% net balance in Q2.

While there is no doubting increased activity across the aluminium in building sector (fabricators are increasingly reporting healthy order books into 2016) there appears to have been a further degree of evening out in the second quarter of the year. For example, the net balance of CAB members expecting to operate at over 90% in the 12 months ahead rose from 29% in Q1/2015 to 40% in Q2 which is very close to the 44% in Q4, 2014.

While it was heartening to see strong expectations for labour growth over the next 12 months (73% net balance) there will be concern that the increase in demand is also fuelling labour costs for the same period (95% net balance) which are ahead of overall construction sector expectations for the same period (72% net balance). In summary the key concern is whether the supply of skilled labour over the next year or so will be able to meet the rising demand.

CAB’s unique quarterly State of the Market Surveys provide an insight into current and expected trends in the aluminium in building sector. Each quarter CAB members complete a personalised version of the questionnaire which is then integrated into the wider Construction Products Association (CPA) survey. This utilises a balance of respondents to assess results and identify trends. A positive balance of respondents means that the percentage of firms reporting a rise is more than the proportion of firms that report a decline.

For further information contact Justin on 01453 828851 or email justin.ratcliffe@c-a-b.org.uk