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01 / The state of play

The activity index rose two points to the no-change mark of 50 in March – the first time it has been out of negative territory since February 2008. However, the recovery remains weak, and the outlook for employment in the industry is not good.

At the sectoral level, the activity indices rose across all three sectors, and that for civil engineering showed a particularly strong increase. Posting 64, 13 points higher than February’s reading, the civil engineering activity index was at a 30-month high. The residential and non-residential indices both reached 50.

The new orders index increased by three points during March, but, at 44, signalled that orders were once again below normal for the time of year. The tender enquiries index fell five points, returning to negative territory in March.

As for employment prospects, the index remained substantially below 50 in March at 37, but has shown a generally rising trend since plummeting to 23 early in 2009. However, it continues to indicate that firms expect to further reduce staff levels over the coming three months.

The proportion of respondents reporting no constraint on activity increased to 23% in March, the highest figure since September last year. About 56% of firms indicated that insufficient demand was affecting activity, a significant increase from the 43% four months ago. Bad weather was reported as a constraint by just 3% of respondents, a substantial drop from 10% in February and 17% in January, not surprising given the unusually bad weather at the start of the year.

02 / Leading construction activity indicator

The recovery remains fragile according to the leading construction activity indicator. While the index hit 50 in March for the first time since February 2008, the prediction is that it will cross back down into negative territory over the following three months.

The indicator uses a base level of 50 – an index above that indicates an increase in activity, below that a decrease.

(See corresponding graphs below)

03 / Work-in-hand

In March, 14.6% of non-residential firms reported that they had more than six months work accounted for, almost double the proportion three months ago (7.7%). The proportion of residential firms with significant levels of work-in-hand fell slightly to 9%, while 11% of civil engineering firms indicated a similar level of work already accounted for.

Although all civil engineering firms indicated less than three months work-in-hand in January, that proportion has now fallen to 56%, in line with non-residential firms and only slightly less than the 60% of residential respondents.

(See corresponding graphs below)

04 / Regional perspective

Four of the 11 regional indices rose in March, and the index for the south-east remained unchanged at 48. The West Midlands saw the strongest increase, with its index jumping nine points, but still remained below 50 at 44. It was a similar situation in the North-west and East Anglia, where the indices rose by six and five points, respectively, but they still remained in negative territory. The East Midlands index rose three points to 58, and was above 50 for the third consecutive month.

The largest fall was seen in Wales, with the index plummeting by 14 points, but it still remained in positive territory at 53. However, the Welsh index has been rather volatile in recent months, reflecting low levels of responses from the devolved nation.

Northern Ireland and Scotland both also saw significant falls in their indices, which dropped back below 50 for the first time in four months. The indices for both nations posted 44 in March. The index for the south-west fell seven points, but remained above 50 at 51.

The UK index, including firms working in more than five regions, edged down one point to 56.

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 map below)