'No guarantee' construction sector is in recovery

4 February 2009

04 February 2009 | Paul Snell

Activity in the UK construction sector rebounded slightly in January, but remained at a very low level.

The latest CIPS/Markit Purchasing Managers' Index for construction, where a figure below 50 represents contraction, recorded 34.5 last month. This was higher than the 29.3 it registered at the end of 2008, but still demonstrated significant contraction in the sector.

More competition, fewer tendering opportunities and fewer successful bids, coupled with the worsening economic situation, led to a drop in orders for construction firms.

"A number of UK contractors believed they were over the worst in January, and were looking more hopefully toward the coming year," said Gemma Wallace, economist at Markit. "Although data did signal some improvement in many indices most remained at historically low levels, which certainly provides no guarantee of the sector being on the road to recovery."

Activity across the three major sectors - housing, civil engineering and commercial - continued to fall, although the rate of decline was slower in each area than the previous month. Employment also fell, with firms reducing working hours and days as well as making staff redundant.

But buyers were also more optimistic about their prospects in 2009. The index rose to 55.3 last month, compared with 48.1 in December.

* Further coverage of PMI reports is available at http://www.supplymanagement.com

SMfeb2009

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