Confidence in UK Construction Sector Plunges to New Low

on Dec 5, 2012
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**Activity in Britain’s Construction Sector Sinks**

Confidence within the UK construction sector dropped to its lowest level since the depths of the financial crisis, following steep falls in new projects and employment numbers, a survey showed on Tuesday. The Markit and the Chartered Institute of Purchasing & Supply (CIPS) gauge for November found construction executives’ confidence in the sector’s outlook for the year ahead was at its worst since the near-record lows of December 2008.

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This sharp confidence dip has affected market activity, with the influential Markit/CIPS construction purchasing managers’ index (PMI) falling significantly this month to 49.3, from October’s 50.9 figure, where a measure below 50.0 signals a contraction in activity. November’s reading, which is the lowest since August and far below the long-running average measure of 54.1, was also below general market expectations of a small rise in activity.

**“A Year to Forget for the Construction Sector”**
The recent Markit/CIPS data caps a gloomy year for Britain’s construction sector, which makes up 7 per cent of the country’s GDP. The Times quoted senior economist at Markit, Tim Moore, as saying: “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 added: “November’s PMI survey suggests that construction output has yet to hit rock bottom. This was highlighted by new work dropping at the fastest pace for around three-and-a-half years.”

!m[Fears Grow Over Steep Fall in New Orders and Continued Job Cuts, Markit/CIPS Survey Shows](/uploads/story/972/thumbs/pic1_inline.png)Chief executive of CIPS David Noble also commented on the recent survey results: “Parallels to darker days of the economic crisis can be seen. Businesses are now set for a bitter end to 2012, with little hope of respite in the new year.” He also noted that “jobs have been slashed in response to the fastest fall in new orders for over three and a half years, confirming the sector’s return to contraction, and the lowest levels of confidence since the height of the economic crisis in 2008.”

**Steep Falls in New Projects and Employment Numbers Weigh on Sector**
A lack of new work is one of the main reasons for the drastic drop in confidence regarding the UK construction sector outlook for the next 12 months. Many of the 170 construction firms surveyed by Markit and CIPS feared that there were not enough new projects to replace completed contracts in the sector.
The lower levels of construction activity were driven by marked reductions in house building and commercial activity during November. This was highlighted by the steepest reduction in incoming new business since April 2009. Lower new order volumes have now been recorded for six months running. The largest rise in civil engineering work for seven months was not enough to offset the sharpest fall in commercial construction since December 2009 and six consecutive months of contraction in residential building. Consequently, employment in the industry reduced at its fastest rate since December 2010. Construction costs, however, continued a 34 month-long rise driven by increases in fuel and energy prices, the recent survey showed.

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