As the construction sector stutters, can building material manufacturers weather the storm?

June has seen the construction industry take an unfortunate hit. With the economy reported as being at its weakest since 2012 and factory output dropping to its lowest for more than six years, there’s concerns across the sector.

A fall in residential property sales has further added to the industry’s woes. Property transactions dropped by 16.5% last month and 2018 saw a decline in new house or new build registrations of 0.5%. Commercial property saw a downturn, too, with output falling to its weakest point since September 2017.

Unsurprisingly, this has had a knock-on effect on building material manufacturers. In particular, a report by the Construction Products Association (CPA) shows a stalling of investment in the sector. The amount of heavy side firms reporting an increase in investment in structures is down to 8%, compared to a five-year average of 21%. Whereas a growth of investment in plant and equipment fell from 54% to 17%.

Despite all this doom and gloom, though, positive signs remain. There has been strong demand in the sector and construction products manufacturers report optimistic expectations for sales over the course of the year. The CPA’s latest survey of 400 constructions SMEs reveals that 46% of heavy side and light side manufacturers experienced a rise in sales during the first quarter. Growth in product manufacturers’ output is also anticipated to rise further in the coming months.

Head of Sales for the South Rob Kelly said

“With many construction firms stockpiling materials ahead of Brexit, it’s no surprise that manufacturers have seen a surge in demand. However, as demand from construction firms starts to plateau and workforce and materials costs rise, it’s going to become more important than ever that building material makers are prepared for a potential strain on their cash flow.”

“At Growth Street, we’ve already lent over £16.7m to manufacturing businesses dealing with just these kinds of problems. Our overdraft-style facility is a flexible solution for businesses who are finding it harder and harder to secure the capital they need to grow.”

It’s undoubtedly going to be a challenging time for building material manufacturers over the next few years. There’s plenty of opportunities though, too.

Once the future of Britain’s relationship with the European Union is finally pinned down, the construction industry can start to make long-term growth plans once again. On the other hand, demand for housing continues to outstrip supply, with one recent government report identifying a need for up to 340,000 homes each year to 2031.

What really matters is not only how building material manufacturers react to these changing circumstances, but, more importantly, how well prepared they are for them. To find out how GrowthLine could help your business, visit growthstreet.co.uk/growthline or call 0808 123 1231.

Written on in Business Insights Borrowing