Construction sector hits three-year low

4 March 2013

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4 March 2013 | Anna Reynolds

The UK construction sector continued to shrink last month, according to the latest Purchasing Managers’ Index (PMI).

The Markit/CIPS UK Construction PMI for February showed the industry declined at the fastest pace since October 2009, recording a figure of 46.8, dropping from 48.7 in January.

The index has measured below 50 – indicating a decline in activity – for the past four months. Last month, there was a fall in construction output, with commercial building work decreasing the fastest of the sub-sectors measured. Work on civil engineering projects also fell, although residential construction increased slightly. Construction firms highlighted cuts to client budgets and intense competition for new work, but employment numbers rose fractionally.

Reduced new business volumes contributed to a further decline in purchasing activity at construction companies. Supplier delivery times lengthened again during the month, with some firms linking longer lead-times to lower stock at suppliers.

But construction firms anticipated growth in activity over the next 12 months and survey respondents were hopeful that new sales and marketing strategies and a general rise in new tenders will boost business.

CIPS CEO David Noble commented: “Overall, these figures are disappointing, to say the least, and with little in sight to improve the sector’s fortunes, all eyes will be on the chancellor to do something to prevent further decline in the sector as we approach the budget later in the month.”

Tim Moore, senior economist at Markit, said: “With total output falling at the steepest pace for over three years, the latest PMI survey is confirmation that January’s construction decline was not entirely snow-related. Downward pressure on client budgets alongside subdued public sector spending again led to lower output levels and reduced new order inflows.”

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