Britain’s construction industry boom is all but over. Last year output growth peaked at a 14-year high of 8%, but is forecast to slow sharply this year and next, to 5% and 2% respectively. In 2005, output is expected to rebound modestly, with annual growth of 3%.
Official estimates of the total volume of construction output in the first quarter of 2003 indicate a year-on-year seasonally adjusted increase of just 2.4%. Output of new work was 2.5% higher than in the first quarter of 2002 and repair and maintenance rose by 2.4%.
New private housing output rose by 17.7% between the first quarters of 2002 and 2003, while the level of public sector housing output increased by 3.8% although it was from a small base. Output of infrastructure work dropped 12.7% compared with a year earlier, and private sector industrial and commercial work fell 5.4% and 1.6% respectively. The biggest boost was from other public sector work, which rose by 17.9% between the first quarter of 2002 and the same period this year.
Timber frame growth
New figures on timber frame housing, compiled by the National House-Building Council, indicate a continuing increase in market share. Timber frame was used in a record 14% of all new homes registered with the NHBC in the second quarter of 2003 – up from 13% in the first quarter and from an average of 11% in 2002 as a whole. The largest rise in market share was in Scotland, with an increase from 53% in the first quarter to 72% in the second. There has also been a strong rise in the penetration of timber framing in the detached house sector, up from 12% in the first quarter, to 16%.
But the volume of new construction work in the pipeline is slowing. Orders for new construction projects placed with contractors in the three months to May 2003 were 10.9% lower than a year ago. Total housing orders rose by 13.3%, but commercial and industrial construction contracts fell 23% and 6.3% respectively. Orders for infrastructure projects dropped by 23.7% and other public work was down 1.5%.
The most up-to-date overview of the construction industry, provided by the Chartered Institute of Purchasing and Supply‘s (CIPS) purchasing managers’ index of activity, reveals a marginal improvement in June. The index rose from May’s 18-month low of 52.8 (where 50.0 is the no-change mark) to 53.3. In the housing and commercial sectors activity is expanding “modestly”, but civil engineering firms report only marginal growth.
Deliveries lengthen
The CIPS index of the quantity of construction materials purchased fell to 51.4 in June, from 52.5 in May, reflecting buyers’ attempts to run down stock levels. Despite the weaker growth in demand, however, suppliers’ delivery times are reported to have lengthened significantly.
For timber product suppliers the latest three-month period to May was mixed. Sales by builders’ carpentry and joinery manufacturers rose by 2% compared with a year earlier but kitchen furniture slipped by 4.3% and sawmill output fell 13.1%. UK exports of builders’ carpentry and joinery rose in value by 7% annually in the first quarter of 2003, but imports were up 12%.
Experian Business Strategies forecasts that construction activity will be boosted by the government’s commitments to improving public services and social housing. In contrast, work for the private sector will shrink.
Housebuilding to slow
Experian also says that annual output growth in total housebuilding will slow from 12.2% in 2002 to 7.5% this year and 0.5% in 2004. Infrastructure growth this year and next is predicted at 7%. Non-residential building growth will falter from 10.6% last year, to 4.6% this year and 0.7% in 2004. New construction output will expand by 5.7% in 2003 and by 1.8% next year, compared with 10.7% in 2002. Repair and maintenance is set for growth of 3.5% this year and 2.7% in 2004. The outlook for new work in 2005 is for a small recovery to 3.1% growth, but no change is expected in the pace of expansion in repair and maintenance.