The unprecedented run of industry growth is unlikely to come to an end any time soon, with orders high and employment prospects healthy. Experian Business Strategies reports
01 The state of play
Contractors responding to Experian Business Strategies’ monthly survey were again positive about the state of the industry in June. The overall activity index, incorporating responses from across the UK, from firms in all three construction sectors, stood at 61 for the second month in a row.
Forward-looking indicators suggest the current unprecedented run of industry growth, which started in mid-1996, is unlikely to come to an end any time soon. Orders were reported to be higher than usual for the time of year by a significant number of respondents.
Respondents were less optimistic about tender enquiries and the index slipped by eight points. It did, however, remain firmly in the increasing zone, so did not cause too much concern. Employment prospects in construction remain good, with many firms expressing an intention to increase their headcount over the next three months.
Sectoral performances were, however, mixed in June. The civil engineering sector was by far the strongest, with many contractors reporting a robust increase in their activity levels during the month. It was a different story for the residential sector whose activity index dropped below 50 for the first time in over a year.
It is likely that activity stalled in June as opposed to actually declining. While residential orders were above average for the time of year tender enquiries were in line with usual levels. The non-residential sector fell between the other two. Its activity index dropped to 54, but its orders, tender enquiries and employment indices were all strong.
02 Leading construction activity indicator
See attached graphic
03 Work in hand
When firms last reported on their work-in-hand buffer in March most had between three and six months and this continued to be the case in June.
For residential firms, fortunes were mixed. While the proportion having less than three months work in hand was high at 46% of the total, 17% of residential firms had the security of more than six months work in hand.
The majority, 55%, of non-residential firms had between three and six months work in hand while 30% had less than three months and 15% had more than six months. None of the civil engineering firms we surveyed had more than six months work in hand.
Seventy-one per cent had between three and six months and the remainder had less than three months.
04 Regional perspective
For most regions June was a reasonably strong month and five regions saw their composite indicators rise during the month.
In three regions composite indicators did not change and in the remaining three regions they declined. Regional composite indicators incorporate activity, orders and tender enquiries from the past three months to provide a measure of the relative performance of each region’s construction industry.
Northern Ireland’s composite index topped the regional league table for the fourth month in a row, although its indicator was unchanged from last month when it reached 87. At the other end of the scale, Yorkshire and Humberside’s industry did not see any improvement in June and its indicator fell below 50 for the second consecutive month.
The North-east’s indicator climbed by five points to 62 and Scotland’s indicator rose by four points to also reach 62. An increase of three points took the North-west’s indicator to 54 and smaller increases of two points were recorded in the Eastern and South-east regions.
While three regions recorded a decline in their indicators they all remained firmly above 50 and thus suggested growth in construction activity nonetheless.
Declines ranged from six points to just one point in the East Midlands, Wales and South-west.
This an extract from the monthly Focus survey of construction activity undertaken by Experian’s Business Strategies division on behalf of the European Commission as part of its suite of harmonised EU business surveys. The full survey results and further information on Experian Business Strategies’ forecasts and services can be obtained by calling 020-7746 8263 or logging on to www.constructionfutures.co.uk
The survey is conducted monthly among 800 firms throughout the UK and the analysis is broken down by size of firm, sector of the industry and region. The results are weighted to reflect the size of respondents. As well as the results published in this extract, all of the monthly topics are available by sector, region and size of firm. In addition, quarterly questions seek information on materials costs, labour costs and work in hand.