Job cuts in UK construction sector

2 November 2012

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2 November 2012 | Anna Reynolds

The Markit/CIPS UK Construction PMI for October reported a figure of 50.9, a stronger performance than September’s index of 49.5 but only fractionally above the 50 no-change mark.

Higher levels of construction output were seen in the civil engineering sector, which registered moderate growth for the second month running. Residential building activity was the weakest performing area, with output declining for the fifth month in a row.

The current period of falling new order volumes is the longest seen since 2008/9, reflecting tight budgets and fears about the economic outlook among clients, according to the report.

A lack in new work resulted in job cuts in October with the latest fall in staffing levels the fastest since August 2011. Subcontractor usage also decreased at a solid pace.

Delivery times from suppliers continued to lengthen, extending the current period of deteriorating vendor performance to 26 months. Further, the rise in average cost burdens to the sector was the fastest in 2012 to date with respondents noting higher fuel and energy costs.

CIPS CEO David Noble said: “There is contagion right along the supply chain with rising fuel and energy costs and lengthening delivery times ensuring there is little hope of respite in the immediate future. All of this compounds the imminent threat of budget cuts in 2013.”

Tim Moore senior economist at Markit said: “Construction firms are seeing the most protracted period of new business losses since 2008/09, meaning an escalating shortage of work to replace completed projects. Reflecting this, the year-ahead business outlook was still relatively subdued, as survey respondents cited weak spending patterns and squeezed budgets among clients.”

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