Construction confidence weakens

4 July 2011

4 July 2011 | Angeline Albert

Confidence in the construction sector has fallen along with employment levels, according to the latest Markit/CIPS UK Construction PMI.   

A slower expansion in new orders in June, compared to May, can be seen by the Markit/CIPS Construction PMI, which posted 53.6, down from 54.0 the previous month.

Although growth in the sector continued, the report said “anecdotal evidence suggested that a fall in the conversion of bids to contract wins had resulted in slower growth of new business”.  

This weaker construction activity has led to less confidence in the sector and a decrease in employment at its fastest rate since January. Subsequently, rates charged by sub-contractors fell for the first time for five months. Some companies also noted that voluntary leavers were not being replaced and redundancies had been necessary.

Sentiment among UK construction businesses regarding future activity levels fell sharply in June, with panellists concerned over the availability of public and private sector spending.       

Sarah Bingham, an economist at Markit and author of the UK Construction PMI, said: “The worry is that the level of business confidence has fallen to a six-month low in the sector, which suggests that companies are expecting growth to weaken over the next 12 months. That is perhaps not altogether surprising given a marked easing in the rate of expansion of new business inflows in June.”

David Noble, CEO at CIPS said: “Growth in the UK construction sector was broadly unchanged in June, despite reaching a milestone sixth month of expansion. Optimism about increases in activity was stifled by concern over the overall health of the economy and the level of both public and private sector spending. A solid reduction in employment indicated that firms are meticulously managing their costs, and prospects for any future expansions in output growth look moderate at best with confidence weakening.”

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