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01 / State of play

The total activity index remained stable at 55 in July, just above the 53 point average of the preceding 12 months. The repair and maintenance (R&M) index grew four points to 53 and returned to positive territory for the first time since March 2017.

The orders index was estimated at 63 in July, one point up from June’s figure. This is a positive development, but not a full recovery from the previous month’s drop.

The tender enquiries index fell by three points to 54, although it remained in positive territory. Orders by sector showed a relatively stable picture. Residential orders grew by four points to 62, whereas non-residential and civil engineering orders both ticked down by one point and stood at 68. The residential tender enquiries index fell by 8 points to 54, the lowest figure in 2017.

Non-residential tenders saw no change and stood at 55. The civil engineering tenders index decreased by two points to 55. The tender prices index decreased by seven points.

The index, however, remains firmly on the expansionary side. The employment prospects index dropped five points to 43 in July. July’s survey indicates an increase in some of the constraints faced by respondents. The proportion of respondents not constrained by anything decreased by 10 percentage points to 37%.

This was mainly due to the reported decrease of demand for construction services (insufficient demand was reported by 24% of the respondents, compared to 20% in June) and the growing material and equipment shortages (respondents facing material and/or equipment shortages grew by five percentage points in July).

Labour shortages also seem to be on the rise having fallen in May, with 20% of respondents indicating this as a constraint, the highest ever level. On the positive side, financial constraints appear to have eased, as survey responses indicate a three percentage point drop in the companies pressured financially.

02 / Leading construction activity indicator

Contractors’ workloads continued to grow in July, with the activity index standing at 55 points, the same as in June. The index has been fairly stable since February, ranging between 55 and 56 points. However, the Leading Activity Indicator projects a slight fall in the index over the next few months, although it will remain over 50.

03 / Material costs

As UK inflation seemed to cool, the increase in labour costs also slowed down. In July, 49% of the respondents reported labour cost increases between 2.6% and 5%. At the same time, 10% of the respondents indicated a decrease in labour costs.

Compared to the last two quarters, the proportion of respondents with labour costs increasing by more than 5% has diminished. In the civil engineering sector, 50% of the respondents reported an increase in labour costs between 2.6% and 5%. 25% reported an increase in labour costs between 5.1% and 7.5% and the other 25% – less than 2.5%. No respondents indicated a decrease in labour costs in July.

04 / Regional perspectives

Experian’s regional composite indices incorporate current activity levels, the state of order books and the level of tender enquiries received by contractors to provide a measure of the relative strength of each regional industry.

In July, the general trend was a decrease in the composite index. Only three regions enjoyed an increase in the index. Despite the negative developments, nine regions remain in positive territory.

The North-west was the region showing the most pronounced decrease – nine points to 57. Yorkshire and Humberside’s index fell by six points to 63, remaining solidly in positive territory. Wales and West Midlands slipped into contraction in July, their indices falling to 42 and 47 respectively.

Only three regions recorded positive growth in their indices in July. Scotland moved up by four points, reaching 54 and the South-west and South-east both ticked up by one point to 52.

The UK composite index was estimated at 49 – a one-point decrease. Together with the large drop in June, this brought the index into negative territory. July marked the first figure below the 50-point threshold since September 2016.