The construction market for timber products continues to expand, driven by growth in new orders and reflected in further solid increases in employment numbers. But the medium-term outlook is for slower annual increases, both in new projects and in repair and maintenance work.
The latest snapshot of the industry, provided by the Chartered Institute of Purchasing and Supply‘s survey for March, suggests that the volume of new orders placed with UK firms rose at a similar rate to that in February. Rising workloads were supported by a sharp increase in materials purchasing, but stronger demand has put pressure on suppliers and average lead times lengthened significantly.
Growing workloads
Construction firms also added to their payrolls to cope with growing workloads, according to the survey, and increased the use of sub-contractors to expand their capacity. However, the March seasonally adjusted index of future business activity indicates less optimism about the next 12 months than the previous month’s poll.
Government estimates of total construction output in 2003 show an increase of 4% compared with 2002. New work rose by 3%, despite a fall in the infrastructure and private commercial sectors. Output of repair and maintenance, including improvement work, rose by 7%, with increases in all sectors.
The latest figures on new construction orders compiled by the Department of Trade and Industry reveal a fall of 11% in seasonally adjusted volume terms between the three months to February and the same time a year before.
New orders placed for private housing in the three months to February were up 9% on three months earlier, and were 2% higher than at the same time a year ago. In the much smaller public housing and housing association sector orders dropped 6% between the two latest three-month periods but were 5% higher than a year before.
Orders for new private sector industrial construction fell by 23% between the two three-month periods to February but rose 6% on a year earlier. Private sector commercial orders soared by 36% between the latest three-month periods and by 17% on the year.
Public sector orders, other than for housing or infrastructure works, fell by 20% between the three months to February and the previous three months, and plummeted by 43% compared with a year ago.
Further back in the construction pipeline, the number of planning applications received by district planning authorities in England rose to 154,000 in the fourth quarter of last year – up 4% on the previous quarter and the largest number received in the period since 1988. Decisions were made on 149,000 applications in the fourth quarter, an increase of 3% on a year earlier.
Looking ahead, growth in the volume of new construction will slow to an annual rate of 2.5% in 2005, from an expected 2.8% this year, according to Experian Business Strategies. Repair and maintenance work is forecast to grow by 2.7% next year, from 3.6% in 2004. Total construction activity growth will slow from 3.6% this year, to 2.7% in 2005.
Imports rise
Meanwhile the British timber products industry saw imports of builders’ carpentry and joinery rise by 5% last year, while exports jumped by a fifth. Imports of windows and window frames rose 25%, but door imports dropped by 3%. UK exports of windows and frames, and of doors, improved by 35% and 3% respectively.
The total output of builders’ carpentry and joinery rose by 2% in the three months to February, and by 2% at the annual rate. But kitchen furniture production slipped by nearly 5% between the two latest three-month periods and by over 2% annually.
On UK prices, official statistics show that factory gate prices for builders’ carpentry and joinery rose by 7% during the year to February, while windows, doors and their frames were up 14%. Prices of sawn, planed wood and of veneer sheets, panels and boards were little changed over the year.