UK construction sector 'rooted' in contraction

2 October 2012

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2 October 2012 | Anna Reynolds

The UK construction sector remains “rooted in contraction territory”, according to the latest Purchasing Managers’ Index figures.

In September, the Markit/CIPS PMI for construction reported a figure of 49.5, below the 50-mark indicating no change for the second month running.

The figure is fractionally higher than the 49 recorded in August, but with the rate of inflation hitting a six-month high and low stocks at suppliers resulting in longer lead times for raw materials, construction companies were under stronger cost pressures in September.

Residential building was the worst performing area of the sector, with the latest drop in house building the most significant since December 2010. Commercial activity fell at the fastest rate for more than two years, but there was a growth in civil engineering.

New business decreased for the fourth month in succession, measuring the second-sharpest fall since 2009. The industry noted the current business climate remained unfavourable for securing new contracts.

While staffing levels increased in September, it was at a much slower rate than average. Further, reduced purchasing activity has now been recorded in each of the past four months. Confidence in the sector for the year ahead was among the lowest reported in three years.

Tim Moore, senior economist at Markit, said: “The current stretch of falling new orders is now the longest seen for three years, reflecting shrinking underlying demand alongside delays in spending from both public and private sector sources.

“A lack of new projects meant that confidence in the business outlook remains close to its lowest since the UK economy nosedived into recession during 2008.”

David Noble, CEO at CIPS, said there was little to be positive about: “Homebuilding continues to be hit hard, the commercial sector, so long the star of the industry, has lost its sparkle. That civil engineering has seen a moderate increase in activity is scant consolation. In the absence of investment of some kind, we are likely to see this level of activity continue for some time, or possibly even drop further.”

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