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UK Construction Industry Returns Best Quarter for 2 Years

Product sales volumes for the UK construction industry have shown their best quarter in more than two years according to the Ernst and Young/Construction Products Association Activity Barometer.

Boosted by a strong light side performance, the first quarter records a score of 74, firmly above the 50 ‘no change’ mark and the highest level since the survey started in 2005.

Commenting on the results, Allan Wilén, Economics Director for the Construction Products Association said: “Light side sales continue to benefit from increased demand for insulation and related products following the introduction of the new Part L building regulations. Light side firms have also reported a welcome boost from the government’s investment programmes to bring the existing social housing stock up to standard”.

Although these are promising signs, heavy side firms sounded a more cautious note, giving a reading of 61. Whilst this index reading indicates that overall, heavy side sales are up during this quarter, compared to a year ago, the infrastructure sector remains sluggish and firms report a slow start to the year by private house builders.

Looking ahead, the industry anticipates a further strengthening in construction activity during the second quarter of 2007. The division between light and heavy side manufacturers remains, with light side firms especially positive.

Industry growth is expected to gather momentum during the course of 2007, benefiting from stronger private sector investment and a modest pick-up in government funded work. However, recent interest rate rises are expected to temper consumer related areas such as new private housing and repair, maintenance and improvement work.

Ernst and Young Partner and construction specialist, Simon Oldfield, added: “These are very encouraging results which are consistent with the feedback we are receiving from our clients - the UK is continuing to experience growth in most areas, including RMI which is showing gradual improvement following a more difficult period in 2006. As a result, the UK market is proving to be relatively attractive when compared with the US which has been particularly impacted by a slow-down in the housing market and inability to recover rising input prices.

“Whilst there continue to be some regional variations, the major UK housebuilders have been putting out generally optimistic trading statements and this, coupled with continued follow through on government spending promises, suggest that the favourable conditions shown by the Activity Barometer should be sustainable throughout the remainder of 2007."

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