There may be trouble ahead

Activity in the construction industry showed a slight improvement in April, following a small downturn at the beginning of the year. All sectors experienced rising activity, including the first increase in six months for small firms.

However, the outlook is less optimistic, according to survey respondents. Tender enquiries are falling at a more rapid rate, particularly in large and medium-sized firms where they had been holding up well. Orders are also below normal, with the decline again concentrated in large and medium-sized firms. Employment prospects, although still positive, have eased slightly since the highs in the latter part of 2001 and price increases are moderating.

Only contractors in the East Midlands experienced a rise in order books in April – and this was only a marginal increase. The largest falls in orders were recorded in Wales, the South-east and the West Midlands. The tender enquiries balance increased in only three regions: the East Midlands, Northern Ireland and Scotland, and worsened considerably in East Anglia, the South-west and the West Midlands. The outlook for tender prices was optimistic in April, with all regions except Northern Ireland expecting increases over the coming months. Although a majority of regions posted positive employment balances in April, only in three did optimism concerning employment improve – Yorkshire & Humberside, the South-east and Northern Ireland.

Over the year to April 2002, almost three-quarters of firms experienced rising labour costs.