’A Forecast of Two Halves?’

by Phil Slinger – CAB Chief Executive

According to the ‘Construction Industry Forecasts 2022-2023’ produced by the Construction Products Association (CPA), the Construction Industry grew by a substantial 13.3% during 2021, despite the problems of shortage of labour and materials. The double digit growth is mainly due to a market catch-up as the coronavirus pandemic continues to ease.

Construction output is to ease considerably in 2022 according to the CPA with a growth forecast of just 4.3%. The first half of the year is expected to remain busy with projects already ongoing, with caution being expressed in the second half of the year due to rising costs of living which may have an impact on households’ spending decisions, which could have an effect on building starts.

CAB Member’s State of Trade Survey is benchmarked against the wider construction industry and offers an insight into how aluminium fenestration is performing in the sector.

Quarter 4 (Q4) saw a significant drop in Historic Sales Volumes from Members compared to Q3, down from 71% growth, on a net balance, to an 18% growth in the last quarter on net balance in Q4. Members have seen their sales lower than that of the wider Construction Industry which is 31% on net balance. Given the slow down in sales in Q4, sales expectations from Members remain high for the first quarter and full year ahead with an 88% on net balance reporting increases.

44% of Members state likely Constraints on Activity Over the Next 12 Months would be down to Demand, closely followed by 33% of respondents claiming Materials Supply would be also be an issue.

Unsurprisingly, all members have reported that Historic Unit Costs have increased. Members also see costs continuing to rise in the next quarter and in the year ahead. 94% on balance of members blame both rising Energy Costs and Raw Material costs as the main factors, closely followed by Fuel Costs, Wages & Salaries.

Both Historic and Expected Capacity Utilisation of plant and equipment, operating over 90% capacity remains relatively flat with 30 to 40% of Members running their businesses at this level. This closely follows the trend in the wider Construction Industry.

During 2021 Members have seen their requirement for additional labour continue to increase, quarter on quarter, on net balance of members. In Q4 44% of members on net balance have increased their workforce over the past year and now 61% on net balance expect their workforce to increase in the coming year.

Labour Costs have increased with 89% of Members on net balance stating costs have increased in the last year, with 94% on net balance stating that further increases in costs are likely in the year ahead. Both Labour force demand and Labour Costs have increased for Members broadly in line with the wider Construction Industry.

Whilst Members Historic Exports during 2021 have not met forecast, Q4 Members forecast that 63% of members on balance expect to increase their level of exports, double that expected in Q2. These expectations are well ahead of the general Construction Industry which has seen an historic drop in exports during 2021.

Capital Investment during 2021 has seen both Plant & Equipment and Product Improvement shifts. During the Q2 and Q3 2021 Plant & Equipment was the dominant investment, whereas Q4 sees Product Improvement and Plant and Equipment being the dominant investments. All results are net balance, but would equate to capital investments for members in the year ahead suggesting Members forecasting growth.

With the implementation of Approved Document L in 2022 most systems companies and installers can meet the improved thermal efficiency, but additional investment in products will be required to meet the challenges of the completion of net-zero carbon home construction by 2025.

In conclusion, it is a bit of a mixed position but, on balance, the market continues to grow despite the shortages across the sector. CAB Member companies who are innovative and seek new ways of procurements, recycling and utilisation of new technology will continue to succeed in the competitive sector.

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