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01 / The state of play

The first signs of improvement emerged in April. After 25 consecutive months below the no-change mark of 50, the construction activity index increased by four points to 54. However, despite a rise in tender enquiries from the preceding month (the index climbed nine points to 56), order books remained below normal for the time of season (the index held steady month-on-month at 44).

Thus, not surprisingly, survey respondents expect to continue reducing prices charged to clients over the next three months. This was illustrated by the tender price index edging down one point to 43 in April.

Difficulties persist in the construction employment market. The employment prospects index remained below 50 for the 28th consecutive month, suggesting that firms intend to reduce their headcount over the coming three months. However, the view was less pessimistic from March since the index rose by three points to 40.

Although the proportion of respondents reporting no constraint on activity (28%) increased for the fourth consecutive month in April, insufficient demand remained a problem for more than half of those surveyed (51%). Furthermore, finance was an issue for 17%, up from 14% in March.

Improving weather conditions meant that only 1% reported it to be an activity constraint, and the same percentage said material or equipment shortage was a problem. Unsurprisingly, labour shortage was not an issue for any respondents, although 2% had been constrained by other factors.

02 / Leading construction activity indicator

According to CFR’s Leading Construction Activity Indicator, construction activity will stabilise in June (having been in expansionary territory in the previous month), before returning to growth in July with a two point increase to 52.

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

(see corresponding .pdf)

03 / Labour costs

In April, half of the building and civil engineering firms surveyed indicated that labour costs had fallen over the past year, although a quarter reported labour cost inflation of between 2.6% and 5%. The equivalent proportion (25%) of civil engineering companies experienced an annual increase in costs of more than 7.6%, a bigger percentage than the 16% of building firms who saw the same rise.

Moreover, almost 7% of residential and non-residential companies felt that labour costs had increased by less than 2.5%, while more than 2% pointed to a rise of between 5.1% and 7.5%.

(see corresponding .pdf)

04 / Regional perspective

The indices for the North and the East Midlands were 53 in April, a decline of three points and five points respectively; Wales’ index remained the same month-on-month. This suggests that these three UK regions were the only ones in expansionary territory. Meanwhile, the Yorkshire & Humberside and East Anglia indices reached the no-change mark of 50 in April, with the former seeing a rise of 11 points and the latter an increase of one point.

The North-west and Scotland experienced the same magnitude of rise in their indices (three points) to reach 45 and 47, respectively, and the figure for the South-west moved in the opposite direction, falling from 51 in March to 48 in April. Furthermore, the indices for the South-east and Northern Ireland increased one point each, with the former rising to 49 and the latter to 45. Over the same period, the index for the West Midlands increased two points to 46.

The UK index, which includes firms working in more than five regions, edged down one point to 55.

Experian’s regional composite indices 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.

(see corresponding .pdf)