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Confidence lowest for four years as new orders decline

The UK construction sector deteriorated during November, with output falling for the third time in the past four months amid the steepest new orders decline for just over three-and-a half years.
That’s according to the latest Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®).

The Index posted 49.3 in November, down from 50.9 in the previous month and its lowest level since August. A score of 50 is neutral, anything less than 50 means conditions are getting worse.

A lack of new business to replace completed contracts contributed to a marked drop in confidence regarding the outlook for the next 12 months.

Lower levels of construction activity were driven by solid reductions in house building and commercial

activity during November. Residential building has now dropped for six months running, while the latest fall in commercial construction was the steepest since December 2009. In contrast, civil engineering activity increased again, and at the most marked pace for seven months.

The November data showed a solid reduction in purchasing activity across the UK construction sector, thereby extending the current period of decline to six months. However, lead-times from suppliers continued to lengthen. Average supplier performance has deteriorated in each month since September 2010.

Tim Moore, Senior Economist at Markit said: “A protracted decline in workloads, the double-dip UK recession and shrinking investment spending has made 2012 a year to forget for the construction sector.

“November’s PMI survey suggests that construction output has yet to hit rock bottom. This was highlighted by new work dropping at the fastest pace for around three-and-a-half years, while signs of a greater squeeze on client’s budgets for 2013 brought confidence to its weakest since the record lows of late-2008.

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: “Businesses are now set for a bitter end to 2012 with little hope of respite in the New Year. Jobs have been slashed in response to the fastest fall in new orders for over three-and-a half years, confirming the sector’s return to contraction and the lowest levels of confidence seen since the height of the economic crisis in 2008.

“To add insult to injury, input price inflation eased only marginally from the ten-month high in October, courtesy of high fuel and energy costs, leaving the sector in a difficult place as it searches for relief ahead of 2013.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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