SME construction sector growth stabilises

SME construction sector growth stabilises.

* New order levels still rising.

* Input cost inflation eases slightly.

* Employment levels still strong.

The pace of growth for small and medium sized construction companies weakened slightly in the first quarter of 2005 although they maintained their level of new contracts through aggressive tendering, according to the 'PKF SME Index', a quarterly survey of 800 SMEs operating in the manufacturing, construction and service sectors.

Output in the first quarter of 2005 was 53.5 which was a sharp fall from 58.5 at the end of 2004 (where scores above 50 indicate a rise on the previous quarter).

However, the level of new business orders was still very strong at 58.8 and considerably above the UK SME average of 54.8.

Most respondents said that they were starting on new contracts and one intriguingly cited "a sudden burst of earthmoving activity"! Not surprisingly, employment levels in the sector continued to rise at 55.9, the second highest recorded level since Q4 2000.

This figure contrasts sharply with the manufacturing sector which recorded its second successive quarterly drop (48.0).

Input cost inflation continues to rise steeply although there is some easing from last quarter's figure of 74.4 to 69.4.

The costs of oil, steel, stone and concrete all continue to rise and Land Fill charges have also gone up.

Stuart Barnsdall, partner specialising in growing businesses at PKF, commenting on the SME Index findings, said: "SME construction companies are still enjoying high levels of activity despite the reported slowdown of the residential housing market".

"This is unlikely to have a major impact on construction companies as there is both a growing demand for new housing and government commitment to the provision of much more affordable housing, particularly in the South East.".

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