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Little optimism for struggling construction sector

THE UK construction sector shed staff at the fastest pace for 14 months in October, as housebuilding and commercial property construction activity continued to decline, a survey showed yesterday.

However, a slowing of the rate of decline in housebuilding and continued growth in civil engineering meant that the survey from the Chartered Institute of Purchasing and Supply (CIPS) recorded a return to marginal growth of overall UK construction activity last month.

The fragility of the sector was nevertheless underlined by a continuing fall in new orders for UK construction companies. New orders have now declined for five consecutive months.

And construction companies' confidence about the year ahead remained relatively weak.

Housebuilding activity has fallen for five straight months. Commercial property construction activity has dropped in each of the past three months.

CIPS's headline activity index for UK construction rose from 49.5 in September to 50.9 in October on a seasonally adjusted basis.

While this index was above the level of 50, which separates expansion from contraction in this survey, after two months below this level, CIPS pointed out the October reading was "only fractionally" in growth territory.

It added that the October reading was also much weaker than the average of 56.3 in the decade leading up to the global financial crisis in 2008, "thereby highlighting an ongoing subdued trend in output across the construction sector".

Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "Despite the marginal rise in the headline activity index, the October purchasing managers' survey still points to a markedly struggling construction sector, and indicates that it is very possible that the sector could be headed for yet further contraction in the fourth quarter after it markedly failed to join in the general rebound in economic activity in the third quarter."

He noted that, on the basis of figures from the Office for National Statistics, UK construction output had fallen by a further 2.5% quarter-on-quarter in the three months to September.

Tim Moore, senior economist at financial information company Markit, and author of CIPS's UK construction sector survey, said: "The bigger picture remains bleak given ongoing falls in new orders, alongside renewed job cuts across the sector over the month."

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