THE UK construction industry last month suffered its steepest monthly drop in new business volumes since April 2009 and housebuilding activity tumbled, but the dominant services sector achieved growth, surveys have revealed.
The Chartered Institute of Purchasing and Supply (CIPS) activity index for construction dropped from 50.9 in July to 49 in August on a seasonally-adjusted basis, falling below 50 to show renewed contraction on CIPS's measure.
Housebuilding, civil engineering, and commercial property construction, the three sub-sectors surveyed by CIPS, suffered declines in activity in August.
The steepest fall in activity was in housebuilding, and the decline in commercial property construction was, according to CIPS, the first monthly drop in this sub-sector's output in two-and-a-half years.
And UK construction firms were last month at their least optimistic since October 2011 about activity levels in 12 months' time.
The new orders index tumbled from 48.4 in July to 47.3 in August, its lowest reading since April 2009. This was the third straight monthly fall in new orders signalled by CIPS's survey.
CIPS noted construction firms had cited "lower spending patterns among both public and private sector clients in August".
Tim Moore, senior economist at financial information company Markit and author of CIPS's construction survey, said: "August data reaffirm that UK construction firms are suffering a prolonged downturn in new work and there is little evidence to suggest an imminent rebound in output levels. This has been the pertinent message from the UK construction surveys throughout the summer and, most worryingly, the latest drop in new orders was the fastest since the sector was in full-scale retreat in early 2009.
"A construction decline for 2012 overall is statistically baked in the cake. To bring output for the year as a whole up to the total level seen in 2011 would require a rather implausible double-digit (percentage) growth surge in each of the final two quarters. Therefore, an important issue is simply whether a floor has yet been established, and the survey evidence at this stage seems to suggest it hasn't."
Mr Moore noted construction output had, according to CIPS' survey, dropped in August at the second-fastest rate since the snow-affected February 2010.
Employment in UK construction stagnated in August, CIPS' survey showed. Some firms said increased concerns about the business outlook had weighed on their job-hiring decisions last month.
Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "The construction purchasing managers' survey for August is largely bleak, maintaining the depressing stream of poor news on the sector and highlighting the need for government initiatives to try and lift infrastructure activity and house-building."
In contrast to the weak construction survey, CIPS' business activity index for the UK services sector rose from 51 in July to 53.7 in August to signal faster growth. Services firms reported a mixed impact on activity from the Olympics.
While the services survey is a bright spot amid a slew of gloomy UK economic releases, CIPS noted sales and activity growth and confidence among firms in this sector were low by historical standards.
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