UK construction industry shrinks for 18th consecutive month

Published 03rd Sep 2009

Although rate of decline in the construction sector has reduced 'it is still the sick man of the UK economy' says Cips chief



Activity in Britain's construction sector shrank for the 18th month in a row in August, but at a slower pace than July.

The Chartered Institute of Purchasing & Supply (Cips) said the construction purchasing managers' index rose to 47.7 in August. This is an improvement on July's 47 and the 44.5 recorded in June, but still below the 50-point mark that divides growth from contraction.

David Noble, Cips chief executive, said: "Though August saw a reduction in the rate of deterioration in the construction sector, it is still the sick man of the UK economy. Far from a return to growth, the sector remains stuck in an unprecedented 18-month period of contraction.

"Perhaps most concerning was further news of job cuts as companies tried to manage reduced levels of business."

Construction firms continued cutting jobs in August as new work failed to come in. Cips said the use of sub-contractors declined, and at a faster pace since July.

Sarah Ledger, an economist at Markit, said: "The depth of the downturn was highlighted through maintained heavy job losses. Construction companies continued to report improved sentiment over future business prospects, driven by optimism over expected order levels, although this appeared to have little impact on current operations, with purchasing volumes declining despite maintained steep cuts in input prices."

Howard Archer, economist at IHS Global Insight, said the data boosted hopes that the UK economy would return to growth in the current quarter, but cautioned that the housing market and commercial property sectors still face significant problems.

He said: "The construction sector is being helped to a limited extent by the government bringing forward some infrastructure spending to boost the economy, while recent modestly, but steadily rising housing market activity – and increased optimism about the outlook – has helped house building activity rise off its lows. Even so, serious concerns remain about the outlook for the construction sector."

Source: ' Guardian '

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