John Newcomb, Chief Executive, BMF
3 December 2019

Last Quarter I found myself sitting on the fence and unwilling to predict whether the industry was on course for a period of negative growth.  Three months later, you find me in the same uncomfortable position.  Like the curate’s egg, construction results during Q3 have been good in parts.

If the latest ONS figures are accurate – and they are often revised as additional data becomes available – construction as a whole grew by 0.6% in Q3. This was driven by an increase in new work, which rose by 1.4%, but offset by poorer results for repair and maintenance work which was down by 0.8%.  Within this, private housing RMI output – a mainstay of merchant sales – fell by £150m over the quarter.

Meanwhile the Construction Products Association’s Q3 State of Trade Survey revealed marked differences between heavy side and light side product sales.  While 3% of heavy side manufacturers on balance reported a fall in sales in Q3 over Q2, sales of light side products, typically used in the later stages of construction, were reported to have increased by a balance of 54% of manufacturers. 

Looking forward, heavy side manufacturers continue to be cautious, with 11% anticipating a fall in sales in 2020 – the first negative reading of the CPA’s forward-looking indicator in seven years.

This decline in forward confidence is mirrored in the Federation of Master Builders Q3 State of Trade, where employment levels dipped for a second quarter, Q2 having seen the first decline in over 5 years. A balance of 19% of respondents predicted lower future workloads, an increase from 12% in the previous quarter.  86% also anticipated a rise in material prices.

That said, a balance of 34% of FMB builders reported a rise in current workloads in Q3 – up from 27% in Q2, giving some positive news.

Overall, however, 2019 is unlikely to go down as a classic year.  In July, the BMF downgraded its Forecast for merchant sales growth, and there is no reason to think this was not the right call.  Anecdotal reports from merchants over the late summer and into early autumn have come to pass in the Q3 BMBI data.  With the final quarter of the year dominated by a general election, I fear we will have to wait until 2020 to see evidence of the next upturn.



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