New construction orders were all but flat in October and, while there was further growth in overall activity, the pace was sharply slower than in September. Such is the state of construction, according to a survey that accompanies news of sinking consumer confidence and mortgage approvals, and evidence of the first fall in house prices for eight months.

The latest snapshot of conditions in UK construction, from the Chartered Institute of Purchasing and Supply, shows that activity overall continued to expand into the fourth quarter of this year – for the 33rd consecutive month. But the index, in which 50 signals no change, fell to 52.5 in October, down from 54.2 in September and 59.5 three months earlier.

Activity increased in all three broad sectors of the industry during October. Nonetheless the rate of expansion in housing slowed for the fifth month in a row, to an 11-month index low of 53.6 – down from 55.2 the previous month. The pace of growth in commercial projects in October was the weakest since January 1999, dropping from 53 in September, to 51. In contrast, the index of activity in civil engineering work rose from 52.7 in September, to 54.3.

Purchases of materials by construction firms rose during October, but the increase was the weakest since February 1999. Delivery times for construction materials continued to lengthen in October but the index of material prices eased to 57 in October, down from 59.8 a month earlier.

Estimates by the Department of Trade and Industry suggest that the volume of new orders placed with UK contractors for private sector housing in the quarter to August rose by 3% compared with the same period a year ago. Orders for public housing were up 28%, although this sector accounts for only about 15% of total housebuilding.

Orders for commercial projects fell 13% on the year in the quarter to August, says the DTI, but new orders for industrial buildings improved by 8%. Infrastructure orders in the latest quarter were 4% lower than a year earlier. In total, new construction orders fell by 5% between the periods June to August 2000 and 2001, but there was a 12% increase between the two latest quarters, with rises in all sectors.

Work started on an officially estimated total of 45,300 new homes in the three months to August. This is 2% fewer than at the same time in 2000, and includes a year-on-year reduction of 1% in the number of private sector home starts.

The National House-Building Council reports that in Great Britain 10% of new homes it registered during the third quarter of 2001 were timber frame – the same proportion as in the previous three quarters. In Northern Ireland 4% of registered homes were timber frame (compared with 2% in the second quarter), but in Scotland the proportion fell back to 44%, from 52% in the second quarter. Six per cent of homes in England were timber frame in the third quarter – the same as the previous quarter.

Other indicators of present conditions in the housing market include data from the Bank of England revealing that only 102,000 loans were approved for home purchase during September, compared with a monthly average of 110,000 during the three months to August. Furthermore, Nationwide reports a fall of 0.5% in house prices last month, cutting the annual rate of inflation to 13.1% from 14.6%.

Further intimations of sinking consumer confidence come in a poll by Martin Hamblin GfK for the European Commission. This shows a 13-point drop in confidence about the future of the British economy during October to -33 – the lowest since September 1990. But the index of consumers’ likelihood of spending more on major purchases during the next 12 months than the last 12 has increased by one point from the September level, to -2.

Nonetheless the latest forecast, made by Construction Forecasting & Research, is that output will rise by 2.4% next year and by 2.8% in 2003. This compared with 3.4% growth forecast this year, and repair and maintenance work is expected to make the major contribution to the industry’s total work load.
Related Files
Construction Activity & Orders
UK Production
Timber Frame Housing