UK construction sector contracts as new orders hit three-year low

4 September 2012

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4 September 2012 | Anna Reynolds

The Market/CIPS UK Construction PMI fell to 49.0 last month as the volume of new orders dropped at their fastest rate since April 2009.

The figure is down from 50.9 in July and now sits below the 50.0 no-change mark.

The survey found supplier lead times lengthened again in August and low stocks at suppliers contributed to delays in firms receiving construction materials.

Residential building was the worst performing category in the sector. Civil engineering activity saw a step decline.

Commercial activity also fell for the first time in two and a half years, but this reduction was “only marginal”.

Construction companies reported business confidence for the year ahead is the lowest since October 2011.

Tim Moore, senior economist at Markit said: “A construction decline for 2012 overall is statistically baked in the cake. To bring output for the year as a whole up to the total level seen in 2011 would require a rather implausible double-digit growth surge in each of the final two quarters. Therefore, an important issue is simply whether a floor has yet been established, and the survey evidence at this stage seems to suggest it hasn’t.”

CIPS CEO David Noble said: “This is dire news for the construction sector which saw its fastest drop in new orders for over three years. Undoubtedly the government will come under more pressure to help the sector and implement Sir Adrian Montague’s proposals to kick-start house building, when it responds later this year.”

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