Opinion Former

CPA: Exports help product manufacturers, as domestic market weakens in Q4

The Construction Products Association’s latest State of Trade Survey, which has been launched today, shows that manufacturers, particularly on the light side, are benefiting from an increase in export activity to off-set the subdued level of construction activity in the domestic market.

34% of light side and 17% of heavy side manufacturers recorded growth in overseas sales during the past year and a further 55% and 71% respectively maintained export levels in a competitive global marketplace.

Commenting on the figures, Construction Products Association senior economist, Kelly Forrest said: ‘Against a difficult domestic backdrop, it is encouraging to see that exports are growing strongly, especially considering that export growth is a fundamental part of the government’s economic strategy. Furthermore, construction product manufacturers have invested heavily in developing trade links beyond the eurozone and, in Q4, 35% of light side manufacturers with export links sold products into the Asian market, a very high proportion by historical standards.

‘Future prospects for the UK industry, however, remain very uncertain, as cuts to public sector capital budgets impact on the ground and weak economic growth constrains the private sector recovery.

‘Strong input cost inflation also added to the pressures on manufacturers as price increases in raw materials, energy and fuel all had a significant impact on manufacturing costs.

‘Manufacturers of heavy side products, typically used in the early stages of the construction process, reported that conditions were challenging in Q4 but 2011, as a whole, was a better than anticipated year, due largely to publicly-financed work in progress feeding through more slowly than expected and strong growth in export activity. However, the cuts to public sector capital budgets are now having a tangible impact on the industry and demand from the eurozone, our largest trading partner, remains highly uncertain.’

Other key points include:

-22% of heavy side manufacturers, on balance, reported that sales fell in Q4 (compared with Q3) and 35% reported no change in activity
In contrast, +22% of light side manufacturers reported sales growth in Q4
In the next 12 months -3% of heavy side firms, on balance, expect sales to fall, whereas +20% of light side foresee growth
47% of light side and 82% of heavy side firms expect unit costs to increase in the next 12 months, largely due to further fuel and energy price inflation
81% of light side manufacturers expressed concern about the strength of future demand

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