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Costs hinder construction despite growth

Activity rose in the second quarter of 2014 across all areas of construction, but future growth may be put at risk by rising costs, according to the Construction Products Association (CPA).

Costs hinder construction despite growth

The CPA’s latest Construction Trade Survey reports that contractors, SMEs, specialist contractors, civil engineers and product manufacturers all reported rises in output during Q2, with the majority expecting activity to rise over the next 12-18 months.

Private new housing was the key driver of construction activity during the period, with 41 of contractors reporting output rose in Q2 compared with a year ago.

The largest construction sector, private commercial, also enjoyed an increase in activity with 37% of contractors reporting that commercial output rose in Q2 compared with a year ago. In addition, 46% of building contractors reported that work in publicly-funded education and health construction saw a return to growth.

However, 80% of building contractors reported, on balance, that costs rose over the past year; 95% reported that materials costs rose over the past year and 75% reported that labour costs rose over the past year.

In terms of skills, 47% of building contractors reported that bricklayers and carpenters were difficult to recruit.

Dr Noble Francis, economics director at the CPA, said: “Many major contractors are still working on projects won in 2013 at relatively low prices but have been suffering from the key concerns of rising costs and skills availability, especially in specific sectors such as private new housing.”

In response to the survey, Richard Beresford, chief executive of the National Federation of Builders, said: “The good news is construction output is rising. However, higher tender prices, materials and labour costs and difficulty in securing skilled labour at reasonable cost all highlight the fragility of this recovery.

“Longer term institutional investment and more easily accessible finance options for the industry would go some way to securing stable, sustainable growth.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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