Tracker: April 2017

01 / State of play

In April, the total activity index remained largely unchanged, having lost a single point to 55. The R&M index, however, dropped into negative territory again (48) after just one month of mild growth. The residential sector activity index lost three points to 53, and the non-residential lost two points to 55. The civil engineering sector gained 20 points to 73, being a more volatile measure due to the smaller sample size.

The construction orders index fell by seven points in April to 63, which totals 13 points in just two months. The tender enquiries index, on the other hand, ticked up a point to 59. The civil engineering sector, however, reported accelerating growth in orders, with its index climbing from 60 to 68 points.

Both the residential and the civil engineering sector tender enquiries indices ticked up – by two and three points respectively. The non-residential sector tender enquiries index was unchanged at 57 points. The tender prices index ticked up by one point only, despite accelerating inflation pressures.

The employment prospects index fell eight points to the zero-growth 50 points level, possibly reflecting increasing uncertainty in the industry on the back of a slowdown in overall economic growth in the first quarter of this year.

In April, a third of respondents faced no constraints to activity, while 28% reported insufficient demand as a constraining factor. Nearly a fifth (19%) were set back by labour shortages, a very high level. This brings into sharp focus the issues the industry could face if the post-Brexit environment includes a much stricter immigration policy. Financing problems continued to plague some respondents (13%), along with other miscellaneous factors (6%), while bad weather conditions and material or equipment shortages were not factors constraining activity in April.

02 / Leading construction activity indicator

CFR’s Leading Construction Activity Indicator ticked down a point in April to 55 points, and we expect it to lose another couple of points over the next four months.

03 / Labour costs

While in the UK the general growth of real (inflation adjusted) earnings is around zero, the construction industry appears to be more severely hit by labour-cost increases. As many as 41% of respondents in the residential and non-residential sector reported cost increases of 7.6% or above, more than in any other month since 2008, except for July 2011. As they did three months ago, 100% of respondents in the civil engineering sector reported labour cost increases between 2.6% and 5%.

04 / Regional perspectives

Experian’s regional composite indices incorporate current activity levels, the state of order books and the level of tender enquiries received by contractors to provide a measure of the relative strength of each regional industry.

The North-east and Yorkshire and the Humber continue to outperform significantly much of the rest of the country, and in April gained three and 11 points respectively. The neighbouring North-west continued its extremely quick recovery, having gained 36 points to 70 since bottoming out in January. Wales and the West Midlands had identical index gains of nine points to 58.

Scotland and the South-east recorded the largest drops in April – seven and six points respectively, yet remained in positive territory. Northern Ireland, though, slipped four points into negative territory for the first time in years.

The UK composite index lost two points to 63, somewhat lower than its level a year ago of 67.