Spotlight: The noughties

Even though we refer to the “economic cycle”, and we’ve been through it many times before, the outcome to our current situation is far from certain. For lead times analysts, the picture isn’t much clearer, as the specialist trades are constantly adjusting their resources in terms of plant, labour and materials based on their own market forecasts. What we can do, however, is analyse the extent to which lead times have fallen across the industry and take a look at the trends over the past 10 years to try to predict future changes.

Ten years ago, the economy was close to its high point, having spent more than 10 years recovering from Black Monday in 1987. Since then, there has been the dotcom boom and bust between 2000 and 2003, the Twin Towers attack in 2001, the credit boom between 2003 and 2007 and the credit crunch of 2008. All of these factors have affected the ability or willingness of construction’s clients to invest in property and thereby changed the demand for services from specialist trades.

In broad terms, we have seen a seven-year cycle with the economy peaking around 2000 and again in 2007 with a low in 2002. Since 2007 we have experienced a sharp decline back to the level of 2002.

Mapping this against trades’ lead time forecasts provides some interesting comparisons. Of the 30 trades analysed, 12 are reporting lead times that are at their lowest since our records began 10 years ago (see box). Most seem to be levelling out at this position, indicating that they are at the bottom of their particular economic cycles.

Although the other trades are not at their lowest, none has reported an increase in the past six months. This would indicate that most specialists anticipate that their trades have reached or are close to reaching the bottom of the economic cycle, which correlates well with the current economic position.

Looking in more detail, the electrical trades appear to follow the economic curve most closely, but with a time lag of about 12 months. They are approaching the end of over a year of falling lead times from a high of 23 weeks to the current level of 14. The previously recorded low was 10 weeks in 1999 and this would indicate that there is potential for it to fall by a few more weeks.

Although the other trades are not at their lowest, none has reported an increase in the past six months

Similarly, concrete work lead times have a lag of between 12 and 18 months against the economic cycle. The longest lead times, of 12 weeks, were reached towards the end of 2008 and they have been falling since that date, currently standing at nine weeks. The time lag suggests a further fall will take place over the next 12 months to the previous low of five weeks.

The most notable reduction has been in reconstituted stone cladding which, notwithstanding a short dip from 31 weeks to 23 weeks in 2003, has fallen steadily over the past six years to its current low of 21 weeks, where it has levelled off for the past 12 months. The cladding trades are reporting quiet workloads and forward order books.

Specialist bespoke joinery lead times have closely followed the economic trend, although their peaks and troughs have been much flatter, with a fluctuation of between 14 and 18 weeks. This is one of the trades that is already at its lowest lead time since our records began.

A few trades seem to be impervious to the changes in the economy. For example, although metal panellised cladding has gradually reduced its lead times from 40 to 36 weeks over the past 10 years, there have been no major peaks or troughs. Similarly, soft floor finishes and logistics have only fluctuated by a couple of weeks.

The traditional trades of brickwork and blockwork had consistent lead times throughout most of the decade, but there was a sharp increase around 2008 for both trades. This has since settled back to the previous low of four weeks for brickwork, with blockwork reported at one week higher.

In summary, the industry in most cases follows the general economic trend but lags by up to 18 months. With 12 trades reporting their lowest lead times, it confirms that they have reached the bottom of the cycle and any “fat” in their lead times has been trimmed out. The general forecast from the trades is that workload and enquiries remain lean for most contractors, indicating that they do not anticipate an upturn in their markets for the next 12 months.