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01 The state of play

With the UK economy’s propects darkening daily, you could be forgiven for expecting a more downbeat response to Experian Business Strategies’ latest contractor survey than usual. In December, however, activity levels held up well. Order books were still reasonably healthy for the time of year and contractors reported that levels of enquiries were strong. The overall activity index stood at 58 for the third consecutive month. The orders index rose by one point to 69 and the tender enquiries by three points to 59. Employment prospects were also strong, with the index climbing two points to 56.

About 20% of respondents, however, reported their activity levels were constrained by insufficient demand, compared with 16% in the previous month. Other constraints included the weather, which is not surprising at this time of year, and planning delays.

Across the sectors, non-residential construction was strongest. Its activity index rose to 62, orders to 85 and employment to 57, suggesting the sector is performing well and that it is likely to continue to do so.

Indicators were also positive for the residential sector. The residential activity index climbed two points to 55. Its orders index was unchanged from the previous month and both its tenders and employment prospects indices dropped a single point. All three remained at a relatively high level despite this.

Civil engineering respondents reported a strong comeback after a subdued November.

02 Leading construction activity indicator

Experian Business Strategies’ leading activity indicator, which models construction activity, orders and tender enquiries to forecast future activity, has generally been following a downward trend since mid-2007. This is forecast to fall further.

03 Work in hand

For most respondents, work in hand levels were reasonably healthy in December.

Non-residential respondents reported the greatest levels of work in hand – 25% of them had more than six months of work on their books, 51% had between three and six months and the remainder less than three months.

In both the residential and civil engineering sectors, 20% of firms had more than six months work in hand and their results were also comparable for less than three months and between three and six months. Three months ago, when respondents last reported on their work in hand, the situation was much better for non-residential and civil engineering firms but not quite so good for those operating in the residential sector. A high proportion of non-residential firms, just over 30%, reported having more than six months work in hand in September, a higher proportion than in December. Back in September, however, less than 15% of respondents had more than six months work in hand.

04 Regional perspective

The regional indicators suggested, almost unanimously, that growth in activity slowed in December. Falls were recorded in all but the South-west, where the indicator stood at 54 for the second consecutive year. Even so, all indicators were higher than 50, which suggests an increase, only at a slower rate.

Scotland’s indicator stood at the highest level even though it fell by six points. Deteriorating weather conditions were a constraining factor in some areas, but many remained optimistic that sunnier climes were on the horizon. Forward-looking indicators remained strong and its indicator stood at 57. The North-east indicator came in close second. At 56 it was almost as strong, although it too suffered a five point decline.

After topping the regional league table for three months in a row, the Welsh indicator suffered a significant fall. A nine point decline lowered its indicator to 55, its lowest level since June 2000.

Several regional indicators, however, hovered closely around the 50 mark, which suggests that net activity neither increased nor decreased. The west Midlands and east Midlands’ indicators both fell by two points to 52. Also at 52 was the Northern Ireland indicator after it took the biggest tumble of all, falling 10 points from November.

Elsewhere there was little to separate the regions. The indicator for Yorkshire & Humberside fell four points to 54.