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01 / The state of play

The construction industry remained downbeat in November, although the rate of decline slowed as the activity index rose two points to reach 35 – the first increase for 10 months.

The star performer was the civil engineering sector, which gained eight points to 41. At the other end of the scale, non-residential activity declined by two points to 37, its lowest level since July 1991. Despite an increase of five points to 32 in the residential sector’s index, it remained the lowest of the three indices.

Orders and tender enquiries remained depressed. The orders index fell by three points in November to reach 42, the point it was at in June 1993. Of those surveyed, 44% considered their order books to be below normal and only 15% said they were above normal. However, the civil engineering orders index was up to 58 from 40, pointing towards higher than normal orders for the first time since January.

Tender enquiries for the construction industry remained stable at 37 to give an unchanged rate of decline in November.

The outlook for employment continued to look bleak, as the index showed no change from the previous month when it was at 28, a historic low. Most firms expect to shed staff over the next few months.

The tender prices index continued to show a general falling trend in November. It hit a record low of 34, down three points from the previous month. With the index remaining well below 50, firms expect to continue to reduce prices.

02 / Leading construction activity indicator

The Experian Business Strategies’ Leading Construction Activity Indicator predicts that construction activity will continue to contract for the next three months. The index is expected to edge downwards by one point to reach 34 in January before a return to 35 in February.

The Leading Activity Indicator uses a base level of 50; an index above that level indicates an increase in activity, below that level a decrease.

03 / Material costs

In November, 80% of civil engineering firms reported material costs rising by more than 7.6% compared with a year earlier. This was 30% more than three months ago. Another 20% of firms said annual material cost inflation was between 5.1% and 7.5%.

About 43% of building firms reported material costs to have increased by more than 7.6%. Another 29% of those surveyed experienced cost inflation of between 2.6% and 5%, and 14% reported a fall in costs over the year to November.

The indications are that individual contractors are experiencing different situations in relation to material costs, which could be due in part to their buying power, or lack of it.

04 / The regional perspective

Of the 11 regions, nine experienced declines in their composite indicators in November. The North-west was the only region to improve, rising by two points to 28. Scotland also stood out by remaining unchanged at 44.

Despite experiencing a fall in its index of six points to 56, the North nonetheless remained above the halfway mark. This indicated growth in activity as well as a fairly buoyant short-term outlook.

Of the nine regions reporting falls in their indices, the steepest declines were in Wales, down six points and the East Midlands, down five points.

Northern Ireland was the worst performing region, alongside the North-west, in terms of its low index value of 28. However, unlike the North-west, the region’s index fell four points since October.

The UK indicator, which is made up of responses from firms operating in more than five regions, fell back below the 50 mark to reach 48 in November. This was a fall of two points from the previous month.

Experian Business Strategies’ regional composite indicators incorporate current activity levels, the state of order books and the number of tender enquiries received by contractors to provide a measure of the relative strength of each regional industry.