New research has revealed the UK's construction industry continued to grow between July and September for the 18th consecutive quarter, despite rising costs and varied performances across some sectors.

Contractors responding to the Construction Products Association's (CPA) Construction Trade Survey for Q3 stated reported increases in sales, output and workloads in the quarter due to a rising demand in private housing, repair and maintenance and infrastructure.

However, while net balances for enquiries and expected product sales for the year ahead remained muted, respondents' order books were sustained by work in only the private housing, housing R&M and non-housing R&M sectors. New orders in sectors such as commercial, industrial and public non-housing were reported lower, which account for one-third of industry output.

Key survey findings include:

• 40% of main building contractors, on balance, reported that construction output rose in the third quarter of 2017 compared with a year ago

• 20% of specialist contractors reported a rise in output during Q3

• 24% of civil engineers, on balance, reported an increase in workloads during Q3

• On balance, 21% of SME contractors reported increased workloads in Q3 compared to three months earlier

• Main contractors reported higher orders in private housing and both housing and non-housing R&M

• 13% of civil engineering firms reported an increase in new orders in Q3, on balance

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• 26% of SMEs but no specialist contractors reported an increase in enquiries in Q3, on balance

• Overall costs increased for 82% of civil engineering contractors, whilst 92% of main contractors, 85% of heavy side manufacturers and all light side manufacturers reported raw materials costs rose in Q3.

In addition, the CPA said the effects of the Sterling's depreciation in the second half of 2016 due to the Referendum are still pervasive. 92% of main contractors, 85% of heavy side manufacturers and all light side manufacturers have reported a rise in raw materials costs between July and September.

However, only a small proportion of contractors are increasing tender prices, which has resulted in 31% of main contractors reporting a fall in margins, the worst balance in five years.

Rebecca Larkin, Senior Economist at the CPA, said: "This 18th consecutive quarter of growth reported by the industry stands in contrast to the construction recession in preliminary GDP data from the ONS. There is a clear division in fortunes across sectors, however, with weakness in the commercial and industrial sectors offset by strength in new build private housing, a sector where demand and confidence remain supported by the Help to Buy equity loan.

"In common with the wider economy, the construction industry continues to experience cost inflation, particularly for raw materials. A clear consequence of the supply chain trying to absorb these higher costs is the fall in contractors' profit margins since the start of the year. Combined with a smaller pipeline of upcoming work in some key sectors, the survey's more mixed view on near-term industry prospects is not surprising."

Suzannah Nichol, Chief Executive of Build UK said: "The latest Construction Trade Survey result highlights the industry's continued growth, contrary to ONS's statistics, with both contractors and specialist contractors reporting a rise in output during Q3. However, a lack of required skills remains a concern, with labour availability issues continuing to impact on contractors' business performance. Build UK believes industry needs to recruit, train and retain a skilled workforce and we are working with members, government and other key stakeholders to ensure that this remains a key priority."

CECA Director of External Affairs, Marie-Claude Hemming, said: "It is good news that our members see growth in infrastructure, to the benefit of businesses and communities across the country. However, uncertainty continues to act as a drag on the ability of the construction industry more generally to boost the economy. Ahead of the Autumn Budget, we are calling on the UK Government to commit to the projects outlined in the National Infrastructure Delivery Plan, to secure the foundations of a strong economy, drive productivity, and deliver post-Brexit growth."

(LM)