The national outlook over the next two years may look flat, but some regions are about to experience a boom – particularly in the East Midlands and Wales, says Experian Business Strategies
Contractors’ activity continued to edge up in July, leading to a two points rise in the activity index to 54. However, the market is slower than it was in July last year, when activity stood at 59, and the outlook for the housebuilding sector looks poor.
The orders index also increased two points to 66, the second consecutive monthly rise after a slight dip in June. The tender enquiries index rose a single point; it now stands at 54.
In July the employment prospects index stood at 50 for the third consecutive month. Contractors remained optimistic about their ability to maintain tender prices, although the level of optimism fell slightly from June, leading to a three points fall in the index to 60.
The Leading Construction Activity Indicator suggests that work will continue to increase over the next three months, but the rate of growth is set to slow from July, when the index reached 54. The index is predicted to average 52.5 over the next three months.
Growth will not be equally spread. In recent years, the main drivers of construction output have been the northern regions. These are expected to take a back seat between now and 2007, as activity accelerates in the central regions. The annual average increase to 2007 in the central region is predicted to be about 7%, compared with 3% for the northern regions and a little under 3% for the South.
The Eastern region, the East Midlands and Wales are expected to be the star performers, growing between 7% and 9%. The North-west has the dullest outlook with total growth over the period barely reaching 4%.
The survey is conducted monthly among about 800 firms throughout the UK. 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. In addition to 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.
Activity levels - index*
Activity in the civil engineering sector was robust in July, with the index rising 16 points to 67, the highest level since August 2003. The non-residential index also rose reasonably strongly, at five points – however this performance was subdued when compared with the increase in civil engineering. The residential sector’s index fell in July but only a single point, and now stands at 50, meaning that the level of activity did not change during the month. The percentage of firms reporting no constraints on activity increased in July after falling in June. Of the firms reporting constraints, insufficient demand continued to be the most significant, but was cited by only 22% of respondents compared with 27% in May and June. Labour shortages were experienced by 10% of respondents and 8% were constrained by other factors.
Order book - index*
The largest increase in the orders index was in the non-residential sector, which at 77 has risen four points since June. The residential sector’s index rose marginally to 63 points, as did civil engineering, which reached 67 points. On a three-month moving total basis, the non-residential index rose one point to 73, civil engineering fell one point to 67 and residential orders remained at 62.
Tender enquiries - index*
Standing at 50 for the second consecutive month, no change has been seen in the level of tenders in the residential sector since May. Movement in the non-residential sector’s index was marginal, increasing one point to 61. By contrast the civil engineering sector’s tenders index declined 10 points to 54, its lowest since May 2003.
Tender prices - index*
The tender prices index declined in all three sectors. The residential sector’s index fell most, four points to 59. The non-residential index declined three points to 60 and the civil engineering index a single point to 63. However, all three indices remained above 50, indicating that tender prices continued to increase, albeit at a slowing rate.
Employment - index*
Increases were recorded in civil engineering and residential’s employment indices in July. The strongest rise was recorded in the civil engineering sector, which increased four points to 62. The residential sector’s index rose two points to 51. No movement was recorded in the non-residential employment index.
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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 European Union business surveys. The full survey results and further information on Experian’s forecasts and services can be obtained by calling 0870-1968 263 or visiting www.constructionfutures.co.uk