We had the pleasure this week of attending the Construction Product Association’s (CPA) webinar discussing their Summer Forecast (available for members here). As always, Noble Francis provided some really interesting insight into the UK economy, the construction sector, and the potential future of the construction products industry.
A few of the key insights I would like to highlight from the webinar are:
- Housing demand continues to be strong and house builders are confident on demand until at least Q1 2022.
- Private housing rm&i demand remains strong & SMEs have projects lined up throughout this year but materials availability & cost is a major issue.
- There has been a sharp rise in shipping costs from China to Northern Europe, with the cost of a container rising from £1,500 to £13,208 between November 2020 and July 2021.
- UK construction still had 139,200 employees on furlough according to HMRC payments made to contractors despite the recovery in activity.
These furloughed employees are a puzzling statistics given the skills crisis, with many firms reporting difficulty in finding the labour they need amidst rising demand. While about half can be accounted for by firms working with underutilised commercial buildings or sectors in which activity hasn’t returned to pre-Covid-19 levels, the other half seems a mystery.
In any case, mystery aside the greater the tension in the labour market the stronger the push becomes for construction to integrate technology and automation. One fascinating insight into intelligent industrial warehouses automation brought to our attention today comes from Ocado’s grocery warehouse, where thousands of mechanical boxes sort groceries for delivery in a space the size of seven football fields.
The Summer Forecast was not the only report we received from CPA this week, as we also received the State of Trade Survey (locked for TTF members). Again, pulling out a few key statistics we can see;
- 63% of heavy side firms and 44% of light side firms reported that sales rose in Q2, the fourth consecutive quarter of growth.
- Manufacturers’ sales expectations for the next 12 months remained positive, with 79% of heavy side firms anticipating a rise, the highest balance in nearly eight years.
- Raw materials remained the key driver of inflation, with all product manufacturers surveyed reporting higher costs.
These reports showcase some of the tension in the market, as we did in our latest Market Statement, and in our Monthly Statistics which helped inform this report. The movements in supply, demand, and price since the pandemic are likely to continue to produce many interesting economic quirks in the months ahead.
As always, nothing in the global economy happens in isolation – and the UK, Brexit or no Brexit, is not an exception to this rule. While we still foresee a return to a more stable situation as the pandemic eases, there remain many ‘black swans’ or indeed ‘black elephants’ which could upset the balance.
Have a great weekend all.
Latest TTF magazine publications
Make sure you keep an eye out for our eight page supplement in the August/September issue of the FMB magazine, Master Builder, which has just been issued to their 8,000 SME builder members nationwide.
We are now working on our Autumn/Winter magazines for the builders’ merchant and joinery markets, Good Wood Business and Joined Up Business, and invite members to contact us with any appropriate material.
News round up for your week
CPA Weekly Notes: Todays notes cover the recent statistics releases, consultation on the Building Safety Levy, CLC updates on self-isolation, and stories on builders struggling to secure sufficient quantities of bricks, cement, timber, and other crucial supplies. This is restricted to TTF Members.
CPA UK Economic and Construction Update: There were 81,338 mortgage approvals in the UK in June 2021 according to the Bank of England, 6.5% lower than in May 2021 and 24.5% higher than the average of 2018-2019. The fall is unsurprising given mortgage approvals in June 2021 would only complete after the Stamp Duty holiday deadline, however approvals still remain at levels unseen since the before the financial crisis. The Nationwide house price index report that the average price of a home in July 2021 was 10.5% higher than a year earlier. This is restricted to TTF Members.
Climate change targets will be missed unless home improvement market overhauled, say FMB and CREDS: Climate change targets won’t be delivered unless the home improvements market is overhauled, according to a new report Building on our Strengths published jointly today by the Federation of Master Builders (FMB) and the Centre for Research into Energy Demand Solutions (CREDS).
Only 2% of new homes meet top energy efficiency standard, Inside Housing: Showing some of the challenge ahead for the market, currently just 2% of the new homes delivered in England and Wales in the second quarter of 2021 were built to the highest energy efficiency standard, according to the latest Energy Performance Certificate (EPC).
Builders fear cement shortage will persist until 2022, Telegraph: Builders are struggling to secure sufficient quantities of bricks, cement, timber, and other crucial supplies. Demand is high as many Britons seek home improvements to give themselves more space, funded with cash saved during lockdowns. Meanwhile, Covid-19, Brexit and disruption in Chinese ports and on the Suez Canal have restricted supply
Up-and-down market causing headaches for NZ foresters: For those interested in how other markets are faring in a disrupted global timber market, forestry contractors in New Zealand say they are losing money, work and jobs as a result of fluctuations in the market for timber and delays at the ports.
For more information, visit ttf.co.uk