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Construction activity increases amongst fears for future

The UK construction sector grew again in September, however expectations for future performance was muted.
That’s according to the latest Markit/CIPS Construction Purchasing Managers’ Index, which had a score of 53.8, stronger than the 52.1 recorded in August.

However, confidence over future business expectations was notably lower, and jobs were cut at the fastest pace in six months.

Both the commercial and civil engineering sub-sectors , with the rise in civil engineering activity the strongest since February 2008. In contrast, the residential construction sub-sector recorded a marked fall in activity as housebuilding fell away, ending a twelve-month period of growth.

Despite growth in both new orders and activity, employment in the UK construction sector fell in September – and at a marked rate. Anecdotal evidence suggested that companies continued to reassess costs and resourcing requirements in order to remain competitive.

Purchasing activity at construction companies continued to rise, reflective of sustained growth in activity. Suppliers’ delivery times lengthened, but the extent was fractional.

Confidence amongst UK construction companies was notably weaker during September, as concerns over public spending cutbacks remained. Whilst, on balance, activity is expected to rise over the coming year, the degree of optimism fell since August to an eighteen-month low. Only in the second half of 2008 has sentiment been lower than that indicated in September.

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: “Whilst the construction sector is still growing, a sharp fall in confidence suggests work in the pipeline may not be so strong. Not since the onset of the recession have we seen optimism in such short supply.

“Commercial and civil engineering activity was on the up and contributed to overall growth. However, this may be only a temporary reprieve – once the last of the public sector budget has been exhausted it is likely that we will see a negative impact from the inevitable cuts.

“Meanwhile, firms continue to nervously reassess their resourcing requirements, suggesting that staffing costs will be squeezed for the foreseeable future.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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