New construction orders - February 2007: Expert analysis (Benchmark)

PDF of February 2006 orders

The latest construction new orders figures paint a mixed picture for future industry workload, with overall order volumes in the three months ended February relatively unchanged both compared with the previous three months and the same period a year ago.

New orders for commercial projects – a key driver of industry activity last year – continued to stall, with order volumes down by 13% compared with a year earlier. However, within the commercial sector the performance continues to be mixed. New orders for offices remained firm, up by a third compared with a year earlier. In contrast, new orders for retail and leisure projects continue to be subdued despite the rebound in retail spending and consumer confidence.

In addition, PFI education and health-related projects have slipped back markedly in recent months, with order volumes dropping by more than half compared with the same period a year ago. The weakness in PFI health projects has partly been offset by a rebound in the flow of traditionally funded health projects in recent months, which helped to support a 6% rise in public non-residential new orders.

Public housing new orders remain particularly strong, up by more than half on a year earlier. New orders for private housing also picked up recently, with order volumes in the three months ended February up by 4% compared with a year earlier despite expectations of more muted housing market activity this year.

While the infrastructure sector appears to be stabilising, the underlying picture remains fragile. Indeed, the recent spike in infrastructure orders is mainly attributable to a £340m roads contract for the widening of the M1 placed in January. In contrast, after the sharp jump in new orders for the electricity industry, as well as for gas, communication and air projects last year, order volumes continued to fall back during the three months to February. More encouragingly, water and sewerage industry investment is finally picking up, with order volumes rising sharply in the three months to February. This supports expectations that the flow of infrastructure work should improve during the current year.

Industrial new orders were down on a year ago, although last year’s figures were boosted by one large factory contract. More recently, industrial orders picked up, rising by almost a fifth compared with the previous three months.