Amid falling output in much of manufacturing, consumers are still shopping, and buying houses, and builders are using more construction materials to put up new homes, shops and offices.

The April purchasing managers’ index, from BuildOnline and the Chartered Institute of Purchasing and Supply, shows that the construction industry is refusing to be talked into a recession. Business confidence stayed well up during the month, with the degree of optimism higher than seen throughout most of 1999 and all of 2000.

The housing, commercial, and civil engineering sectors all report significant growth in activity (a seasonally adjusted indicator which provides a single figure snapshot of the business climate). The index saw its 27th consecutive month of expansion and was at a three-month high.

The strongest growth was recorded in the housing index, although it slowed slightly compared with March. The commercial sector registered a further marked increase too, albeit also at a marginally slower rate than the previous month. In contrast, the pace of growth of the civil engineering index accelerated for the third month in succession.

The growth in activity across the industry reflects ongoing improvements in new orders. In response, businesses report a significant increase in the purchase of construction materials in April.

Figures from the Department of the Environment, Transport and the Regions show that orders placed with contractors for new building work rose by 13% in the first quarter of 2001 compared with the previous quarter, and by 7% on the level of a year earlier. In the three months to March, orders for private housing were up 12% on the quarter, while new infrastructure orders soared by 28%. Orders for commercial and industrial work rose by 16% and 6% respectively.

Other official statistics reveal that work started on 7% more dwellings in the first quarter of 2001 than in the previous quarter, at 46,600. Private sector starts increased by a similar percentage, to 41,400.

Separate data from the National House-Building Council suggests that in Great Britain 10% of new homes registered with them during the first quarter of 2001 were of timber frame construction. This is the same proportion as in the fourth quarter of last year, but up from 9% a year earlier. In Northern Ireland no new timber frame homes were registered in the first quarter, but the NHBC points out that some are privately built and therefore may not be registered.

On the supply side, production of builders’ carpentry by British firms for home and export customers increased in the first quarter by 1.1% compared with the final quarter of last year. In 2000 as a whole, output rose by 2%.

Imports of builders’ carpentry and joinery increased by 12.7% last year, to £272.7m, but export sales grew by 10.4%, to £57.3m. However, imports of prefabricated buildings fell by 23.1% on the year, as exports shrank by 12.2%.

Looking at future prospects for construction, analysts at Construction Forecasting & Research Ltd say the short-term outlook is of continuing growth throughout 2001 and 2002.

Total output, including new projects and repair and maintenance, will increase by 2.5% this year and by a further 3% in 2002. Last year it expanded by 1.5%. Repair and maintenance work, which accounted for 46% of the industry total last year, is forecast to increase by 4% and 4.5% respectively this year and next.

New work is set for 0.5% overall growth this year, and 2% in 2002. Infrastructure output is due to rise by 5% and 4% respectively this year and next, but housing is expected to decline by 3% in 2001 before growing by just 0.5% in 2002. However, this forecast may prove unduly pessimistic if the widely expected further cuts in borrowing costs are realised, thereby making house purchases increasingly attractive.
Related Files
Construction Activity and Orders
UK Production
Timber Frame Housing