Construction growth grinds to a halt

4 October 2011

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4 October 2011 | Adam Leach

A reduction in the rate of new orders in the UK construction sector resulted in the lowest possible rate of growth for September.

The Markit/CIPS Construction Purchasing Managers’ Index reported a score of 50.1, fractionally above the no change threshold of 50. The latest score indicates a significant contraction in activity over the past month, 2.5 points weaker than the performance in August.

The report attributed the drop to a contraction in new orders, with UK construction companies reporting reductions in new business for the first time since February. Companies cited fewer opportunities to submit tenders and projects being delayed or cancelled as reasons behind the drop in business. Despite this, staff levels in the sector increased, albeit marginally.

CIPS CEO David Noble, said: “‘Things can only get better’ is the feeling among some UK construction companies as many pin their hopes on improved market conditions to pull the sector out of this near standstill. However, delayed and cancelled projects, more competitive tendering and general uncertainty over economic conditions are putting a dampener on things, resulting in the first reduction of new orders in 19 months.”

In terms of the sectors, housing and civil engineering recorded lower output. Of the two, residential construction performed the weakest. Commercial construction sector activity continued to grow, but at a slower rate than recent months.

Markit economist Sarah Bingham, said: “Civil engineering declined during September, reflective of cuts in public spending. Meanwhile, house building activity decreased at the fastest rate in nine months. However, recent announcements by the government may provide a reprieve in the coming months, as plans are made for land to be released for development, with construction companies not paying until the resulting properties are sold.”

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