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Energy costs undermine recovery

CONSTRUCTION output has strengthened since the start of 2006 and looks set to grow further in the second quarter, although high energy costs are continuing to undermine the recovery, according to the latest Construction Industry Trade Survey, published by the Construction Products Association (CPA) and the Construction Confederation.

In the survey construction product manufacturers reported an overall improvement in activity, with light-side firms leading the growth once again and heavy-side firms experiencing mixed success.

Commenting on the findings, Michael Ankers, chief executive of the CPA, said: ‘Light-side firms seem to have benefited from government social housing, school building and NHS investment programmes. The fact that a significant number of heavy-side firms are also reporting growth suggests that some at least are finally benefiting from the start of much-delayed infrastructure projects.’

The rise in activity so far this year follows a disappointing 2005 and supports industry forecasts of a modest recovery in 2006. However, Mr Ankers has warned that sharp fuel and energy prices are ‘increasing unit costs and squeezing profit margins’ of product manufacturers and contractors alike.

‘Despite the moderate rise in construction output, there is growing industry concern over the impact of rising energy costs,’ said Mr Ankers. ‘Some construction product manufacturers have faced gas price rises of up to 300% over the last three years, while others anticipate energy price hikes as their fixed-term contracts come to an end. The consequences of this on the price for products are only just beginning to feed through.’

To obtain a copy of the latest survey, contact Máren Baldauf at the CPA on tel: (020) 7323 3770.


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