UK construction sector paints 'a depressing picture'

3 January 2013

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3 January 2013 | Anna Reynolds

Construction activity hit a six-month low in December, as the Markit/CIPS Purchasing Managers’ Index for the sector dropped from 49.3 in November to 48.7, well below the 50-mark indicating contraction.

Last month’s reading indicated the fastest rate of contraction in the sector since June 2012, triggered largely by a steep decline in house building which fell at the quickest rate since December 2010.

UK construction companies reported a drop in volumes of incoming new work for the seventh consecutive month, with strong competition for a shrinking pool of new tenders. The lack of new work to replace completed projects contributed to low employment levels for the third month running in December.

Despite reductions in input purchases, companies continued to report delays in deliveries from suppliers. Alongside poor supplier performance was a further rise in average costs for builders with the rate of input price inflation the second fastest since March 2012.

Business confidence for the year ahead remains subdued, with firms reporting squeezed budgets for 2013. Commenting on the report, CIPS CEO David Noble said: “Confidence in the construction sector is now lower than the four-year post-recession average, reflecting the poor performance of the sector in the final month of 2012. Continued increases in business costs, alongside low stocks at suppliers and longer delivery times complete a depressing picture for the construction sector going into 2013.”

Tim Moore, senior economist at Markit, added: “A sharp and accelerated downturn in housing activity was the most striking feature among the overall weakness shown by December’s PMI survey. The extent of the decline made December 2012 one of the worst months for housing activity since the spring of 2009.”

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