News

For anyone engaged in construction-related haulage - estimated to be the largest sector of any in road transport - the latest figures released by the Construction Products Association (CPA) make for grim reading. The CPA's quarterly Activity Barometer, which shows how busy producers are, was released at the end of September and showed a figure of 26, compared with a mark of 50, which would represent no change to the market. According to the CPA this is the lowest result since the barometer started  15 quarters ago and a sharp downturn from a year ago where the barometer peaked at 80. Although there are still projects progressing in the public sector, activity in the private sector, notably house building, has tumbled.

In turn, this has led to a dramatic fall in the demand for certain products - for instance, construction products manufacturer Hanson says it has seen a fall of around 30% year-on-year in demand for bricks. Other manufacturers, Tarmac and Cemex for instance, have also seen a sharp decline in demand for some of their building products. Equally, last week's news (MT 2 October) that both Cemex and Castle Cement, the latter part of the same group as Hanson, were to cut 15% of their bulk cement drivers is a reflection of the decline in that market, which is showing a 15% year-on-year fall.

What lies ahead?

There appears to be no good news on the horizon either. Last week, the CPA published its construction output forecast for the next three years,  which predicts a decline of 7% over that period. It's not until 2011, says the association, that the market will begin growing again, and even in 2012 the number of housing starts will be below 2007 levels. It estimates that total output will fall by 2% this year and by another 5% in 2009.

At present, high levels of public spending are maintaining some life in the market. However, the CPA warns that with the poor state of public finances, plus reduced tax revenue due to the economic slowdown, the position after 2010 is expected to worsen. Michael Ankers, chief executive of the CPA, says: "The construction products industry has a combined turnover of £20bn and is the largest volume of goods moved around the transport network, therefore when construction output falls, so does the need for transport."

Operators' view

It's a view that's reflected at the sharp end of the industry. One Midlands brick-and-block haulier, who asked to remain anonymous, says that the volume of bricks handled by his operation has fallen by around 40% this year. He adds: "There's definitely been a dramatic slowdown in construction work and I don't think we have hit the bottom yet. It's a pretty gloomy picture at the moment. "Some of the sites we deliver to have stopped any new building - they're just finishing what they have started."

The firm has picked up work outside its traditional sector this year and has reduced the amount of subcontracting it uses, both of which have helped to maintain profitability. Spending on new equipment has also been drastically reduced: "We spent just over £1.8m on new equipment last year, but this year I've not spent anything and I don't intend to either."

Another firm affected by the construction downturn is Turners (Soham). It distributes both bulk and bagged cement for French firm Lafarge. MD Paul Day says that as a response to the difficulties in the marketplace, it has already eliminated the use of subcontractors on the work. He adds: "We are responding to [the downturn] on a week-by-week and month-by-month basis. We have now got to a point where our vehicles aren't as busy as they were and we have to reduce our fleet. At this stage we have only reduced our fleet by a minimal amount. If it keeps dropping, then I'm sure it will impact us to a greater extent than it has so far."

Looking at logistics

However, Ankers believes there may be some good to come out of the crisis through a greater focus on logistics in the sector. Traditionally, construction has been very bad at co-ordinating the movement of product, he says, which leads to loads getting lost or going missing on site, missed deliveries and enforced downtime through product shortages. Ankers adds: "I think there will be a much greater focus on logistics because people are looking to take cost out. They will look hard at ways of becoming more efficient. I think the logistics industry has a lot to offer construction - it can bring organisation and discipline, which will take cost and [lost] time out."

Equally, one firm is already seeing an increase in work due to problems elsewhere. Buxton haulier Lomas Distribution works for cement producer Buxton Lime Industries, part of the Tarmac Group. As the Buxton kiln is Tarmac's only cement plant, in times of peak demand the firm has previously bought in cement from the likes of Castle or Cemex. However, it has now concentrated everything in-house, meaning more work for Lomas. Director Richard Lomas adds: "Although we've seen the downturn, we've actually set more drivers on [to that contract]. It's meant our drivers going longer distances with cement."