More doom and gloom for construction industry

The UK construction industry contracted again in September, and at a faster pace than in August. Sharper falls in housing activity, commercial activity, new orders, employment, sub-contractor usage, and purchasing activity were all recorded during the latest survey period.

The headline figure from the seasonally adjusted CIPS/Markit UK Construction Purchasing Managers’ Index (PMI) signalled a rapid monthly deterioration in industry activity. Activity levels again fell across all three sub-sectors of the UK construction economy in September. Rates of decline picked up in both housing and commercial sub-sectors, reaching a series record in the latter. In contrast, the speed of contraction slowed for the second consecutive month in the civil engineering sub-sector to only a marginal pace.

The latest, and steeper, decline in total UK construction activity was linked by most survey participants to the ongoing financial crisis and poor global economic conditions. Competition to secure contracts intensified during the latest survey period, resulting in more unsuccessful tenders and smaller order books at many survey panellists’ firms. With activity levels falling, construction firms reduced their buying activity, staffing levels, and sub-contractor usage at the quickest rates since the survey began in April 1997.

The continued global economic and financial problems, falling activity and new order levels, plus strong input price inflation, left expectations within the UK construction economy understandably subdued. Confidence regarding activity levels over the coming year fell to its lowest level in the series history during September, as a number of firms predicted growth as contraction.

Commenting on the UK Construction PMI survey, Roy Ayliffe, director of Professional Practice at the Chartered Institute of Purchasing and Supply, said: “As the volatility of the world’s financial markets reached fever pitch in September, purchasing managers reported a fall in activity levels throughout the UK construction economy, as companies laid off staff at a considerable pace and sharply reduced buying activity. Fierce competition for new contracts persisted and intensified, resulting in yet more fruitless tenders and diminishing order books.

“Housing again took a battering and was joined by the commercial sub-sector in terms of bleak performance. In the face of myriad obstacles, including rocketing energy prices, UK constructors were dejected and their confidence about the future performance of the sector hit a record low.”