Gloomy outlook as construction suffers

First published in Business News

FEARS that the UK economy will contract again were fuelled by the latest snapshot of the construction industry as it revealed a worsethan- expected fall in activity.

The Markit/Chartered Institute of Purchasing and Supply (CIPS) construction purchasing managers’ activity index fell to 49.3 last month, down from 50.9 in October and below the reading of 50 which represents growth.

City experts had predicted a 50.5 figure but reductions in housebuilding and commercial projects drove construction activity lower.

Tim Moore, senior economist and survey author at Markit, said: “A protracted decline in workloads, the double-dip UK recession and shrinking investment spending has made 2012 a year to forget for the construction sector.”

He warned signs of a greater squeeze on client budgets suggested construction output was yet to hit rock bottom.

Howard Archer, chief European and UK economist at IHS Global Insight, said the economy was going to be reliant on the services sector to avoid a renewed GDP dip in the fourth quarter. He added that the survey intensified the case for strong Government initiatives to try to lift infrastructure activity and house building.

The survey also revealed job numbers in the industry were cut at the fastest rate for nearly two years last month and new order numbers in November had contracted at the steepest rate since April 2009.

David Noble, chief executive of the CIPS, said: “Parallels to the darker days of the economic crisis can be seen in the construction sector.

“Businesses are now set for a bitter end to 2012, with little hope of respite in the new year.”

The survey said residential building activity had dropped for six months running and the fall in commercial construction was the steepest since December 2009.

It also said construction firms had been hit by rising fuel and energy costs.

Concerns about the lack of new invitations to tender amid reductions to clients’ budgets pushed the measure of confidence, the future business activity index, to the lowest level since December 2008.

The survey said activity in the civil engineering sector has increased at the most marked pace for seven months.

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