Heavy and Light Side Firms Report Quarterly Increase in Product Sales Volumes

The results of Construction Products Association’s latest State of Trade Survey suggest that the recovery of the construction product manufacturing sector is still in the early stages. In the third quarter of 2024, both heavy side and light side firms reported a quarterly increase in product sales volumes, set against a backdrop of low capacity utilisation and labour cost pressures.

In 2024 Q3, a balance of 55% of heavy side manufacturers reported that sales of construction products increased. This was the second straight quarter of growth, bringing an end to a prolonged period of contraction since 2022 Q2. Alongside this, 8% of light side manufacturers reported a rise in product sales.

Despite growth over the quarter, heavy side sales were still lower than a year earlier given there has been an ongoing, and significant, reduction in demand from the two largest sectors of construction: private housing new build and repairs, maintenance and improvement (RM&I). Manufacturers on both the heavy side and light side expected growth in sales over the next 12 months. Nevertheless, low capacity utilisation, continued uncertainty over the future strength of demand, and strong labour cost inflation even before the increase in employers’ National Insurance Contributions announced in the Autumn Budget, registered as three of the standout themes affecting business confidence.

Rebecca Larkin, CPA Head of Construction Research said: “The green shoots of recovery have emerged slowly over the last two surveys and appear fairly tentative so far. The sharp falls in construction activity in two key markets for product manufacturers – new build housing and housing RM&I – as well as the cancellation of several large roads projects have had a stark impact on manufacturing operations, with heavy side capacity reined in Although a return to growth over the next 12 months was widely expected in the Q3 survey, low capacity utilisation, which tends to be due to mothballed production lines, can take time to restart.

“Wages and salaries registered as one of the primary drivers of input cost inflation in Q3. Subsequent announcements in the Autumn Budget of a 6.7% increase in the National Living Wage and the rise in employers’ National Insurance Contributions from next April will only add to headwinds as the construction and product manufacturing recoveries try to gain pace.”   

Key survey findings include:

• A balance of 55% of heavy side firms and 8% of light side firms reported that construction products sales rose in 2024 Q3 compared with 2024 Q2
• Comparing 2024 Q3 with 2023 Q3, 27% of heavy side manufacturers reported a decrease in sales, on balance
• 80% of heavy side manufacturers and 50% of light side manufacturers anticipated a rise in sales over the next 12 months
• 83% heavy side manufacturers and 42% of light side manufacturers cited ‘demand’ as the key concern for sales over the next 12 months
• Heavy side manufacturers reported capacity utilisation at 80% or lower, the first time below this threshold in the survey’s history
• All heavy side manufacturers and two-thirds of light side manufacturers reported an increase in wages and salaries compared to a year earlier

The CPA State of Trade Survey is available to CFA members free of charge and can be downloaded from the CFA Members Area, costing £100 for non-members.