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01 / The state of play

There may be some weeds among the green shoots, but there are definitely signs of improvement in the construction industry.

Although the activity index is still showing a decline in activity, it rose four points to an eight-month high of 39 in March. Tender enquiries also showed some improvement; the index rose to 50; this may be the no-change mark, but it is also a 12-month high. This suggests that some confidence is returning, and that projects are reaching the planning stage. However, actual orders remained below average for the season.

It is going to be a long road to recovery, though, and firms are expecting to make further cuts to staff over the coming months. Nevertheless, there was slightly less pessimism than in recent times, with the employment index rising to its highest level for seven months.

Strong sectoral variations remain; a 10-point rise in the residential activity index took it to an 11-month high in March, but the civil engineering sector put in a contrasting performance: its activity index fell back down following a bounce-back in February. On the non-residential side, the activity index remained below 50 but edged up one point; the orders index for the sector remained above 50, suggesting that they were still increasing. However, at 51, it was only a very weak rate.

Expectations remain that firms will cut their tender prices over the next few months, although the index rose to a four-month high of 33, indicating a weaker rate of decline.

02 / Leading construction activity indicator

The Leading Construction Activity Indicator points to a further decline over the coming three months, albeit at a slowing rate. The indicator is expected to edge up in each month, reaching 45 in June. This uses a base level of 50 – a figure above that level indicates an increase in activity, below that level a decrease. (See graphs below)

03 / Work in hand

There was a general increase in the level of work-in-hand in the three months to March. Conditions remained tight for residential firms, with more than 60% reporting order books of fewer than three months; the proportion was less than 50% for the non-residential and civil engineering sectors.

The residential and civil engineering sectors showed a marked growth in order books to more than six months, with 17% of residential firms and one-fifth of civil engineerings reporting work-in-hand extending beyond this period. By contrast, non-residential order books slimmed slightly, with the number of firms indicating order books of more than three months falling from December 2008. (See Graph below)

04 / Regional perspective

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.

The indicator for Wales rose nine points to 54 in March, the first time any region has seen a reading above 50 since November last year, and the first time for Wales since September 2008. The indicators also increased across nine of the remaining regions, with the West Midlands the exception. The indicator for that region fell four points to 37, its lowest reading since November 2000.

Apart from Wales, the North and South-east saw the strongest increases in their indicators, which rose by six points to 47 and 44, respectively. The indicators for Scotland and Northern Ireland both increased four points, reaching 47 and 39.

The index for East Anglia rose marginally to 48, but this was the highest reading for eight months. The East Midlands increase of one point to 39. In the North-west, the indicator rose two points to 29, but this was still significantly below the other regions.

The UK indicator, which comprises responses from firms working in more than five regions, rose three points to a three-month high of 42.