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01 The state of play

The UK construction industry continued to perform strongly in April, according to Experian Business Strategies’ latest survey, although there were minor falls in a couple of the main indicators.

The overall activity index, incorporating responses from across the UK and from firms working in all three sectors, nudged upwards by one point to 60. Employment prospects continued to be strongly positive, with many respondents saying they intend to increase their headcount over the next quarter.

Forward-looking indicators such as order and tender enquiries, however, wavered slightly; their respective indices fell by one point and three points. Such small declines were rather inconsequential given the relatively high level both indices reached in March, and even after they declined, they stood at 67 and 58 respectively – a sufficiently high level to suggest reasonable increases compared with the previous month.

The civil engineering sectors had the strongest performance, despite a four-point drop in its activity index. Orders and tender enquiries in this sector also held up well and employment prospects remained buoyant.

The residential sector fared well, too: it was the only one whose activity index rose one point, as did its orders index.

The non-residential sector was a little more subdued. Its activity, orders and tender enquiries indices all declined, although the outlook for employment remained strong.

02 Leading construction activity indicator

(See graph attached below)

03 Labour costs

For most respondents in all three sectors, annual labour cost inflation was running at 5% or less in April. Such levels were reported by 67% of civil engineering respondents and 70% of residential and non-residential respondents. Labour cost inflation of more than 7.5% was not reported by any civil engineering firms, but 15% of building firms did encounter a cost burden of this magnitude.

Respondents were also quizzed on the level of labour cost inflation they faced three months ago and, since then, inflation in the civil engineering sector has moderated considerably. On the building side, however, labour cost pressures have intensified and for many respondents annual labour cost inflation was much higher than three months ago.

04 Regional perspective

Construction activity was buoyant across all UK regions in April. Regional composite indicators, incorporating activity, orders and tender enquiries from the past three months to provide a measure of the strength of each region’s industry, all stood firmly above 50, indicating that activity continued to expand across the board.

Robust increases in February and March meant Northern Ireland climbed to the top of the regional league table. Its composite indicator reached a record high of 78, raising it a full 10 points above its nearest rival. Such a strong performance in the province over the past few months could only be a sign of things to come. The incoming Northern Ireland Executive will receive unprecedented levels of funding to develop infrastructure, stimulate economic growth and bring public facilities up to a 21-century standard.

Only two other regions, the South-east and West Midlands, enjoyed rises in April, although these increases were subdued when compared with the rise in Northern Ireland, with each region mustering a single index point.

Firms’ responses in six regions suggested the rate of increase slowed from March. Scotland fell by the largest amount, by four points to 62. Declines were also seen in Yorkshire and Humberside, the South-west, Wales, the North-west and East Anglia.

Indicators for the East Midlands and the North-east were unchanged from March.