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01 / The state of play

The activity indicator continued to rise in June, following the generally upward trend seen since February, although it still remains in negative territory at 44. However, this signalled the weakest rate of decline for 14 months. There were again mixed performances across the sectors; the residential sector was the only one to see a rise in its activity index – to the highest level since February 2008. The civil engineering sector’s activity index has been rather volatile recently, and it fell slightly in June, following a strong rise in the previous month.

Firms have reported a slight improvement in demand conditions in recent months, but more than half of firms (52%) are still citing weak demand as a constraining factor on activity. However, the proportion indicating that there are no limiting factors on activity has increased to just more than one quarter, the largest number for 10 months.

Order books for the construction industry as a whole remain below average, but the non-residential sector saw its index rise above the no-change mark of 50, suggesting that order books are now about normal for the season. There were some further positive signs for the residential sector as its index rose to a 10-month high; nevertheless, it still remained below 50. The tender enquiries index edged above 50 in June – for the first time since January last year – suggesting a weak increase in enquiries.

The employment outlook for the industry remains fairly bleak, with the index posting 38, but it edged up for a fifth successive month, indicating that firms are slightly less pessimistic.

02 / Leading construction activity indicator

According to Experian Business Strategies’ Leading Construction Activity Indicator, activity in the construction sector is expected to continue to contract over the coming months. However, the rate of decline is predicted to ease, with the indicator edging up to 47 in September.

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

03 / Work in hand

The number of firms reporting order books of more than six months dropped across all three sectors in the three months to June. The proportion was just more than 8% for residential firms, compared with 17% three months ago; in the civil engineering sector the proportion had dropped from 20% in March to about 15% in June.

About 58% of non-residential firms reported that they had less than three months’ work accounted for by work in hand – this was compared with 49% in March. Civil engineering firms generally reported higher levels of work in hand than those in the other two subsectors, but almost 54% of companies in the sector still reported less than three months’ work already accounted for.

04 / Regional perspective

Of the 11 regional indicators, all but East Anglia remained below 50, although seven saw an increase in June. The West Midlands indicator rose eight points to 47, the strongest rise across all the regions. Moreover, this took the region’s index to its highest level for 15 months.

Scotland and Northern Ireland posted increases in their indicators of three points, taking them to 44 and 47, respectively. In contrast, the East Midlands indicator edged up by just one point to 42, although this was the highest reading since July last year.

The worst performance came from the Welsh indicator which dropped by five points to 42.

A two-point fall in the indicator for Yorkshire and Humberside took it to 39 and the North’s indicator was down three points at 44. The lowest indicator was again in the North-west, although at 31 it was two points higher than the previous month.

The UK indicator, which includes firms working in more than five regions, remained unchanged at a five-month high of 43 in June.

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 region’s industry.