Building sector hit by bank holidays and rain

Deputy Business Editor

Wednesday 4 July 2012

THE UK construction sector suffered its sharpest contraction in more than two years in June as business conditions worsened.

DROP IN OUTPUT: The UK construction sector suffered its sharpest contraction in more than two years.

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GREIG CAMERON DEPUTY BUSINESS EDITOR

The Markit/CIPS survey showed overall activity fell to 48.2, from 54.4 in May, and below the 50 level which separates growth from contraction.

Factors blamed for the biggest monthly decline since February 2009 include the extra bank holiday due to the Queen's diamond Jubilee and the extremely poor weather.

The research found confidence dipped to the lowest levels since October and the construction workforce contracted for the first time since FebruaryCivil engineering and housing were the worst-performing areas with both reporting a drop in output for the first time since poor weather affected the industry in January. Commercial activity increased slightly but at the slowest pace for 28 months.Tim Moore, author of the Markit/CIPS Construction Purchasing Managers' Index, said: "The UK construction sector moved back into reverse gear in June, with output falling at its fastest pace since the end of 2009 amid a steep decline in civil engineering. A drop in business activity was perhaps inevitable given that the month started with an additional bank holiday and ended with severe weather across large parts of the UK."However, these temporary factors should not be overplayed, as the latest figures reveal worsening underlying business conditions within the sector."Analysts had expected the PMI to come in around 53 with some suggesting the lower figure reflects the poor performance of the housing market and falling levels of Government spending.Howard Archer, chief European and UK economist at IHS Global Insight, said: "The construction purchasing managers' survey for June was substantially weaker than expected and hugely disappointing."David Noble, chief executive at the Chartered Institute of Purchasing and Supply, said: "The renewed declines in construction output and employment are a reflection of the weakening trend in new orders seen in recent months. The contraction was accompanied by a similar fall in cost inflation, but this is scant consolation for businesses, as the global economy continues to cast a shadow over the industry. "Sharp drops in new civil engineering and housing activity were almost matched by the slowdown in commercial activity. "The anomaly of the double bank holiday at the start of the month will have had some negative impact but the underlying sluggishness throughout the industry could point towards a much softer period heading into the third quarter." Coming just a day after the manufacturing sector was shown to contract for the second month in a row the gloomy construction data further suggests the UK's double-dip recession may be longer than first anticipated.

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Building sector hit by bank holidays and rain

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