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'Worrying' state for construction as output continues fall

Construction output has fallen for the twentieth consecutive month. Figures for October figures showed further job cuts prompting fresh worries about the state of the industry.

Monthly figures from the Chartered Institiute of Purchasing and Supply (CIPS) and research group Markit indicate construction output fell to a figure of 46.2 in October - the 20th consecutive month of decline, but the decline was recorded at a faster rate than in September.

The monthly figures monitor the purchasing spend of executives across the construction sector. Figures indicate overall spend, with figures below 50 showing decline, above 50 growth, with 50 indicating no change.

In the civil engineering sector, the decline was the sharpest for 7 months, although the overall figure for new business stood at 50, indicating no change and ending 19 consecutive months of decline.

CIPS chief executive, David Noble, said: “These continue to be worrying times for the UK construction sector as firms continue to struggle in the face of difficult market and economic conditions. The fact that the sector took another turn for the worse this month just highlights how fragile it still is,” he said.

Increases in fuel and poor exchange rates increased input prices, adding to the woe. “Further drops in commercial and civil engineering activity were the key drivers behind the bad news. A stabilisation in order books did little to support activity, while weak sterling and higher fuel prices added to constructors’ difficulties.

“Perhaps of most concern is the continued slashing of jobs at construction firms. The pace of job cuts actually accelerated in October as the current state of the sector means that many who have lost jobs will struggle to find something else before Christmas.”

“The only light at the end of the tunnel was optimism over future business prospects as purchasing managers said they expect workflow to rise due to improving economic conditions and marketing initiatives,” he said.

However, despite the poor figures, optimism remained high. Improving economic conditions were cited as boosting demand and spend in the future.

Sarah Ledger, Economist at Markit said: “The UK construction sector posted its twentieth successive month of contraction in October, with the rate of decline accelerating for a second successive month. However, compared to data recorded at the height of the downturn, the current fall in UK construction sector activity remained relatively modest.

“Encouragingly, data for the residential construction sub-sector signalled improved activity levels for the second consecutive month, and overall new orders volumes received by UK construction companies were reported to have stabilised. Unfortunately, persistent spare capacity meant that further job cuts were made, with this showing no sign of easing. However, with the anticipation of a recovery in economic conditions, optimism over future business activity remained high.”

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