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Construction downturn continues

The only sector to record any sort of rise in activity in October was commercial, according to an industry survey released today (November 2)
The latest Markit/CIPS Construction Purchasing Managers’ Index found that employment reduced at a marked rate, while government spending cuts continued to undermine confidence.

The October survey showed that the recovery of the UK construction sector peaked in the summer, with rises in both new orders and activity slowing. The index stood at 51.6 in October – the lowest reading in an eight-month sequence of expansion.

Sarah Ledger, economist at Markit said: “Whilst the UK construction sector managed to record growth in October, it seems more evident that the current expansion has peaked.

“The month-on-month rise in new business eased once again, with constructors attributing this partly to reluctant clients that are concerned over public spending cuts and the health of the general economy. The slowdown in the sector was highlighted by another month of job cuts, while confidence remained at relatively low levels.

“Looking ahead therefore, it may be reasonable to assume that construction will have less of a positive impact on GDP compared to Q3.”

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: “The recent growth in the construction sector seems to be petering out. Further declines look inevitable as nervy customers and a spendthrift public sector put firms in a precarious position. Construction will have to look much harder for new contracts going forward, so it’s no surprise that many are cutting jobs and reducing purchasing activity to provide a safety net against further falls.

“This data is particularly nerve-racking given the boost the construction sector gave to the overall GDP growth last quarter. Commercial activity may have fared less badly than in the underperforming housing market, but overall expectations of future business remain historically low. The high hopes of earlier in the year seem to have given way to dire predictions on what the future may hold.”

About Fiona Russell-Horne

Fiona Russell-Horne
Group Managing Editor across the BMJ portfolio.

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