A cracking Christmas

Contractors' activity continued to expand in December, and at a faster rate than in November, according to Experian Business Strategies' latest nationwide survey. Order books and tender enquiries were markedly higher than usual and total employment continued to creep upwards. All four headline indices, combining the residential, non-residential and civil engineering sectors, were greater than 50, suggesting expansion across the board.

The only indicator to fall below 50 in 2005 was employment. Respondents reported month-on-month increases in activity throughout the year and order levels and tender enquiries continuously exceeded average levels.

Focusing on the sectors, residential construction faltered somewhat in December whereas civil engineering prospered, at least in terms of activity and orders (see graph below). Civils activity rose 23 points to 74, its highest level since the survey began in 1991. The orders index stood firm at 60. However, a drop in the tender inquiries index to a historically low level raised questions about the sustainability of this boom.

Growth in three out of four key indicators in the residential sector moderated in December, although order levels and tender enquiries were at 60. Residential employment neither increased nor decreased.

Prospects for the non-residential sector remained positive. At 59 its activity index suggests a rapid rise in activity over the month and order levels were exceptionally high at 78. Non-residential employment expanded in December at a faster rate than last month, rising two points to 54.

Work in hand

Most respondents in all three sectors - residential, non-residential and civil engineering - reported work-in-hand levels of between three and six months. Respondents last provided details about their levels of work in hand three months ago, and the situation has generally improved since then. Civils recorded the greatest improvement, with just 37% of respondent reporting work-in-hand levels of less than three months compared with 56% in October. Work-in-hand levels in more than 26% of civil engineering respondents exceeded six months.

The residential sector fared less well, with the proportion of firms reporting levels of more than six months dropping from 25% to 20%. Responses from non-residential firms were comparable to those received three months ago.

A regional perspective

In December three regions' composite indices, measuring activity, orders, and tender enquiries over the past three months, dropped below 50 for the first time in more than a year (see map). Yorkshire and Humberside index fell three points and the North-west's fell four. Overall the West Midlands recorded the weakest performance; its index fell three points to 47.

Elsewhere, construction in eight regions expanded: the North-east, East Midlands, East Anglia, South-east, South-west, Wales and Scotland. However the rate of increase slowed in all but the East Midlands.

The indicator was unchanged from November in the South-west (66), Wales (76) and Scotland (70).

At 76 Wales again recorded the strongest composite index. Although this undoubtedly suggests rapid expansion in Welsh construction, that growth was more subdued than in November when Wales' composite index peaked at 81.