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01 / the state of play

Construction industry conditions were far from good in June but the further deterioration many feared did not materialise. The actual indicators for June suggest the industry remained depressed during the month. At 40, the overall activity index was on par with the previous month, and at its lowest level since June 1991.

Forward-looking indicators did show a mild improvement. Most notably, the orders index climbed from 49 to 53, suggesting that a significant proportion of respondents reported either average or above average orders books for the time of year. The tender enquiries index remained below 50 but gained some ground, climbing by four points to 44. Predictions about prospects for future employment were subdued across the board, however. The employment index fell by four points to 35, the lowest level since late 1992.

The non-residential sector once again showed the most resilience. Its activity index remained below 50 but orders and enquiries levels were stronger, possibly suggesting that better times are just on the horizon.

Responses from civil engineering firms were more pessimistic. Although a significant number of large infrastructure projects are either under way or have an imminent start date, the benefit is being felt only by a minority; elsewhere the sector is struggling because of low demand and rapidly rising costs. The civil engineering index fell to the lowest level since August 1991.

After contracting sharply in recent months, residential sector indicators stabilised.

02 / leading construction activity indicator

Experian Business Strategies’ Leading Activity Indicator, a short-term industry forecasting model, predicts that construction activity will continue to decline in the short term. The rate of decline is, however, expected to slow. After stabilising in July, the indicator is predicted to rise slowly in August and September.

The indicator uses a base level of 50 – above that level shows an increase, below that level a decrease.

03 / work in hand

Despite current circumstances, non-residential firms generally reported a comfortable buffer of work. Work in hand levels rose in the past three months for many respondents, with more than 20% reporting that they extend beyond six months. Nearly 50% of non-residential firms reported order books spanning between three and six months. Such levels do not vary considerably from when times are good.

Conditions are noticeably tighter for civil engineering and residential firms. Fifty-five per cent of civil engineering firms reported less than three months’ advance work secured, a worryingly high proportion even though it is a vast improvement on the 88% that said the same last quarter. Nearly 30% of civil engineering firms reported work in hand of three to six months.

Residential firms reported little change from March. Forty-eight per cent had less than three months’ work in hand, a third had between three and six and the remainder more than six months.

04 / regional perspective

Regional performances varied widely in June. Some areas have so far been relatively sheltered from the slowdown while others have been severely affected. Experian Business Strategies’ regional composite indicators, which incorporate 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 region, stood below 50 in five regions. Indicators were stronger in the others, with the east faring particularly well.

The composite indicator for East Anglia fell by two points, but at 57 it was still much stronger than the indicators for all the other regions. Scotland and the North-east were joint second, both standing at 53. The Scottish indicator was one point down on May and the North-east indicator was unchanged. The East Midlands indicator fell by six points to 52 and the Welsh indicator by four points to 51. The South-east was the only region to buck the declining trend. Its indicator rose by three points to 52.

Yorkshire and Humberside was the weakest region and its indicator fell to a record low. At 30, it declined by nine points in just one month. Indicators for the North-west, the West Midlands were also weak at 34 and 43, respectively. Both Northern Ireland’s and the South-west’s indicators came in at 44 in June.