Construction confidence falls as growth falters

6 June 2012

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6 June 2012 | Adam Leach

Confidence and expectations for the year ahead in the construction sector dipped in May as the rate of growth in the UK construction sector hit a three-month low.

Published today, the Markit/CIPS Construction PMI reported a figure of 54.4 for the month. This is down from the April figure of 55.8, but still above the 50-mark, which indicates expansion. The rate of expansion was the slowest for three months.

Activity in the commercial sub-sector continued to grow at a strong rate. But the rate of growth in the civil engineering sub-sector dropped to the lowest for three months. Residential expansion continued to be the slowest of the three, with only a marginal improvement on April.

New business growth eased to its slowest rate for four months. This in turn slowed the rate of new work expansion, which had hit a four-and-a-half year high in March. The companies that did report a rise in new business attributed it to competitive pricing.

A drop in the number of invitations to tender has also knocked confidence in the sector. Despite this, construction firms continued to recruit, with numbers increasing for the third month running. Cost inflation remained broadly unchanged for the month.

Tim Moore, senior economist at Markit, said: “While still in positive territory, the month-on-month fall in business confidence was the greatest since June 2010, which was when plans for the autumn government spending review were first announced. This reassessment of the year-ahead outlook represents worries within the construction sector that weakening economic conditions could leave firms running on empty again once existing projects have come to completion.”

David Noble, CEO at CIPS, added: “Although still in growth, the marked weakening in new orders since March and April, particularly for larger civil engineering projects, suggests that the recent ramping up of employment in response to work-in-hand may not be sustained.”

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