Weak minerals market hurts government housing ambitions

New stats show growth has all but stopped, with signs of contraction in construction and heavy-side building materials markets.

construction

The government has its housebuilding ambitions further undermined by a weakening market for mineral products, suggesting a slowdown in construction.

New stats from the Mineral Products Association (MPA) show construction market demand for mineral products – including aggregates, asphalt, and ready-mixed concrete (RMC) – has been weak since the start of the year.

“The fall in mineral products markets is the most palpable evidence of the general health of the construction industry,” said Aurelie Delannoy, MPA director of economic affairs.

“Growth has all but stopped, and both construction and heavy-side building materials markets are starting to show signs of contraction.”

Following two consecutive quarters of deteriorating markets, sales volumes of aggregates in the first half of 2019 stood 1.9% lower compared to the same period in 2018, 0.3% lower for RMC, and 1.1% lower for asphalt.

Only mortar sales, closely linked to housebuilding, were 1.4% higher in the first half of the year compared to last year.

But, even though the results show growth in mortar sales volumes in the first half of 2019 compared the same period in 2018, MPA says mortar sales have now declined for four consecutive quarters, indicating a general hiatus in housebuilding.

The overall fall in sales volumes echo official construction data from the Office for National Statistics and other business surveys, which show construction output has flattened in recent months.

Poor sales volumes for these heavy building materials provide physical evidence of the current weakness in construction, as well as an early indication of further weakening to come.

To MPA, reduced market sales for these materials indicates that the level of new construction work is falling and that the lack of new projects will continue to dampen the sector’s activity in the coming months.

As has been the case for the past two years, the decline in RMC sales continues to stem from lower demand in London, where both housebuilding and commercial construction is slowing.

Sales volumes of RMC in the capital are now 19% below their recent peak in the summer of 2016.

There have also been lower asphalt sales, despite the fact that some additional volumes were expected following the Chancellor’s announcement last year of £420m additional funding for local road and bridge maintenance in England to be made available in the financial year 2018/19.

The government has stated that all of the additional funding was distributed to local government, but evidence suggests that at least some of the funding was used to pay for existing work, rather than any additional road maintenance.

While Highways England’s delivery plan proposes a strong pipeline of work over the next two years, current delays fuel industry scepticism about imminent delivery.

“When both housebuilding and the construction of retail and office buildings are slowing, infrastructure projects are increasingly becoming the primary source for growth for the industry,” said Delannoy.

“Ideally, these projects, many of which are planned to start only well into the 2020s, should be accelerated to boost confidence and general economic activity, whilst delivering on the productivity improvements necessary to secure sustainable long-term growth.”

In April this year – as reported by 24housing – the Commons Public Accounts Committee (PAC) heard that the government’s housing ambitions are undermined by the absence of “effective and timely” monitoring data relating to the basics of building.

Then, MPA told PAC that the absence of a consistent baseline position to refer to and the planning and management of mineral provision is having to draw on a range of alternative data sources, which can often be out of date, inconsistent or incomplete.

Essentially, MPA warned that delivery of a sustained increase of housing is not just an issue for the operation of the housing aspects of the land-use planning system, but will require a parallel focus on the effectiveness of the mineral planning system.

This to ensure that mineral products – as the most significant element of the housing supply chain – are readily available from UK sources to enable the sustainable and cost-effective construction of future homes and associated infrastructure.

24housing first flagged the issue in 2017, with government accused of complacency over aggregates.

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