Budget is further boost to positive Q3 Market Survey
October 2018

The Q3, 2018 CAB State of the Market Survey demonstrated that members saw a positive marketplace during the quarter. This positivity was given a further boost in the Chancellor’s budget which set out plans to spend hundreds of millions more in the hope of reaching the Government’s target of 300,000 new homes per year.  

One of the key highlights in Q3 was that compared to Q2, 41% saw a sales rise of up to 5% and 24% experienced a rise of more than 5%.

Construction growth over the past year has been driven by private housing, infrastructure and private housing RM&I which has benefitted the whole supply chain. On a year on year basis, 12% of members reported sales volumes increases of up to 5% and 41% reported rises of more than 5%. Highlighting perhaps the lingering impact of a difficult Q1, 24% of members were still down slightly by not more than 5% year on year. It will be interesting to see the effect of the extended Help to Buy scheme which will now run in a modified format until 2023.

Despite the ongoing economic and political uncertainties relating to Brexit, product manufacturers remained optimistic for the next 12 months in Q3. 41% (59% in Q2) of members forecasted sales growth over the next quarter and 41% (76% in Q2) predicted growth in the 12 months ahead.

Demand was again reported as the key constraint on sales growth over the next year for 69% of members in (53% in Q2). The other constraints were capacity at 13% of respondents and no constraints (13%).

In Q3, 76% of members net balance (91% in Q2) reported unit cost increases over the previous 12 month period. Looking ahead, members’ cost pressures were expected to continue over the next quarter (71%) and the next year (88%). The key drivers of cost inflation in Q3 were wages and salaries (88%), raw materials (82%) and fuel costs (76%).  Cost balances on the whole appear to be easing very slightly from the 2017 peak, but it is worth mentioning the concern about fuel inflation. Since July 2017, the price of Brent crude oil has remained on an upward trajectory and in August 2018 reached a 4 year high of $78.9 per barrel.

In the year to Q3, capacity remained sufficient although 13% of members reported that they had operated at between 90% and full capacity. In 12 months’ time, capacity utilisation was anticipated to be 90% or higher according to 31% of members (35% in Q2).

Once again there was a very positive view of capital investment over the next 12 months. In Q3, product improvement was once again the focus for the year ahead with 63% of members anticipating an increase in this area. Furthermore, balances of 56% and 50% expected to increase investment in plant/equipment and e-business respectively. This was followed by balances of 38% for increased investment in both R&D and property in the year ahead.

On the employment front, in Q3, 56% of members on balance reported that employment rose from a year earlier (47% in Q2). 44% anticipated increasing headcount during the next 12 months (71% in Q2).