Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

Construction sector continued to deteriorate in August

The housing market downturn is still severely affecting construction sector, but civil engineering is the best-performing sub-sector, showing only slight contraction according to the latest report from the Chartered Institute of Purchasing and Supply (CIPS)/Markit.

Operating conditions in the UK construction economy continued to deteriorate in August. The weakening health of the sector reflected declines in activity levels, new orders, employment and purchases, as the industry continued to suffer the combined effects of the credit crisis, widespread input price inflation and the wider global economic downturn.

Activity levels fell across all three sub-sectors of the UK construction economy in August, albeit at slower rates than in July. Of the three, by far the most striking was the rapid contraction in housing construction. In contrast, civil engineering performed the best, posting only a modest decline in business activity.

Lower overall activity levels were attributed by the majority of respondents to poor demand conditions creating fewer opportunities to tender.

With supply outstripping demand for construction work, competition to win new orders was high, driving down the values of tenders and making it difficult to secure contracts. Average incoming new work to UK constructors therefore fell at a substantial pace, albeit one slower than the previous month.

With new orders and activity levels falling, there was little appetite to invest in either raw materials or workers. Purchasing activity, staffing levels and sub-contractor usage were therefore reduced further – although at weaker rates than in July. As demand for raw materials softened, average vendor performance improved solidly. Lead times have now shortened for the past four months.

Adding to the overall gloomy picture, input price inflation, although slower than in July, persisted at a high level with the seasonally adjusted Input Prices Index posting a reading of 78.5. Increased raw material and fuel costs were blamed for the latest inflation. Sub-contractors also raised their charges slightly, despite falling demand for their services and their increased availability.

"UK constructors are still feeling the bite of the credit crunch," said Director of Professional Practice at CIPS Roy Ayliffe. "Although the latest data suggest that the rate of contraction in the sector is easing, conditions remain relatively depressed overall. With far fewer new business opportunities to pitch for, purchasing managers said competition between firms intensified which in turn lowered the values of tenders.

"Housing was again the Achilles Heel of the construction sector, as August data signalled nine consecutive months of housebuilding decline. In an attempt to cope with the onslaught of rising prices, difficult trading conditions and narrowing confidence, purchasing managers were forced to further reduce levels of procurement activity, while more jobs were axed," he said.

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Please note comments made online may also be published in the print edition of New Civil Engineer. Links may be included in your comments but HTML is not permitted.