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Calm after the Budget

Trends

THERE was a time when most leaders in construction looked to the Chancellor's offerings with a view to how much more work it might bring.

How times have changed. The latest Budget brought a likely boost to building in health, education and transport and should help sustain the industry's workflow.

But that was not a central concern this time around.

Construction leaders focused on how Gordon Brown's tax measures might, or in this case fail to, help improve the efficient running of the industry.

Construction is clearly more sophisticated in its thinking. But, equally, it is an industry relatively comfortable with workloads.

The latest figures for contract awards from Glenigan were a tad lacklustre, but this will provide no cause for concern.

The past quarter saw contract lettings drop by 7 per cent compared with the previous quarter, but remain 2 per cent ahead of the first quarter for 1999.

And the average level of work during the past 12 months is the same as in the previous 12 months.

The mix has shifted, with the larger building sector falling a percentage point while civils showed a 6 per cent rise year on year.

While, there has been a drop in the level of contract awards, looking at the figures in a longer time frame, the value of orders for construction work during the past year was 6 per cent higher than the average for the past five years.

In the short term, Milan Khatri, economist with the Royal Institution of Chartered Surveyors, sees construction activity levelling off after a strong pick up towards the end of last year.

'Orders in the housing sector are rising at a fairly steady but moderate pace after a firm increase in the second half of last year. This suggests that higher interest rates are feeding through to demand conditions,' he says.

'It is not surprising that planning applications for London and the South- East are strong, given the huge increase in house prices during the past year.

'However, there are some signs that price increases are beginning to cool.'

'Meanwhile, industrial and commercial building activity have displayed greater signs of a slowdown, reflecting the lagged response of business investment to the economic slowdown in late 1998 and early 1999.'

With renewed vigour showing in the service economy Mr Khatri does expect this, however, to help support private commercial and industrial activity.

And while a strong exchange rate is hurting the manufacturing sector, growth in business services and transport activity will help distribution warehouses, strengthening the industrial figures.

Mr Khatri adds: 'Orders for other sectors such as health and education are holding relatively firm, supported by rising government spending.

'Moreover, the July comprehensive spending review should unveil greater capital spending in the public sector, including not only reinforcing the growth in health and education sectors but boosting transport.'