A ‘Mixed Bag’ for 2025?

The UK’s Consumer Price Index (CPI) inflation rate decreased from 2.6% in November to 2.5% in December. Whilst this is a minor change, it is significant given the financial market concerns at the beginning of the year regarding Government borrowing levels, interest rates, and UK economic growth. Financial markets will closely monitor each monthly inflation and GDP data point in the first half of 2025. The CPI inflation slowdown exceeded market expectations of inflation remaining at 2.6%. Although this may provide some relief, it is likely to be temporary until the next CPI inflation or PMI survey data.


As mentioned in previous reports, the Bank of England will exercise caution regarding interest rate cuts due to persistent inflationary pressures. However if, as anticipated, UK GDP growth in Q4 2024 and Q1 2025 remains relatively flat or slightly negative similar to the situation in Q3, the Bank may face pressure to reduce interest rate cuts sooner.


The CAB State of Trade Report is completed in conjunction with the CPA (Construction Products Association) and is based on business owners feedback, not hard data. The result is a unique ‘feeling’ of where the construction sector sits at the time of each quarterly survey.


Since Q1 the wider CP (Construction Products) market has shown a positive Historic Sales Products net balance from respondents, from the CAB respondents the net balance has been negative. This would indicate that whilst growth is being achieved in new project starts, aluminium fenestration product requirements lag at least 12 months behind.


Expected Sales Volumes into the first quarter of 2025 are holding up well for the wider CP market at a positive 67% on net balance, whilst the CAB membership report just 9% on net balance. Likely due as stated above due the lag between project starts and requirements for fenestration products.


Historic Unit Costs for the CP market shows its highest level on net balance of respondents in the last quarter of 2024 indicating that the pressure on material prices has increased over the year, from a CP market of respondents on net balance from just 4% in Q1 to 75% in Q4. CAB Members report a 45% increase in unit costs on net balance in Q4.


Reviewing Expected Unit Cost both the CP market and CAB Members report an expected significant increase in costs for Q1 2025, 76% and 73% on net balance respectively. Unit cost increases include material, labour and transport costs.


Sales Volumes – Quarter-on-Quarter, are basically the same for Q3 and Q4 showing no growth across the CAB Membership. But reviewing Sales Volumes – Year-on-Year indicates a reduction of sales in 2024 compared with 2023.


Looking at Cost Factors affecting unit costs, 91% of CAB Membership report on net balance that wages and salaries continue to drive the majority of price pressures.


Likely Constraints on Activity Over the Next 12 Months is firmly viewed by 64% of the CAB Membership as being lead by demand, or lack of it during 2025. With CP market activities leading the way during 2024 it would be expected that there will be a pull through of fenestration products in 2025.


Labour Costs feedback shows that 100% on net balance of the CP market reports cost increases include material for the last year and in the year ahead. A little more subdued, but the CAB Membership are suggesting that 82% on net balance expect labour costs to increase further in 2025.


Capital Investment reported by CAB Members puts property investment as the lowest budget concern by -20% on net balance of respondents stating investment. Whilst investment is being put into E-business, the main focus for CAB Members investment remains, R&D, plant improvement and product improvement.


So it is a bit of a mixed bag at the moment looking ahead. Will tax increases reduce staff numbers as already seen in some businesses and when will the level of CP market sales begin to pull through fenestration sales?


Opportunity to discuss these and many other issues between the Membership are provided by Members meetings through the year.


More information about CAB’s 2025 training webinars and events is available through the CAB website. Should you wish to learn more about the use of Aluminium used in Construction, please contact CAB, join the Association and be recognised as being involved in supporting your Industry and helping to shape its future.