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Construction falls at fastest rate in history

Wednesday, 2 July 2008 12:00 AM

The UK construction industry saw reported activity fall at the fastest rate in its history today.

According to the Chartered Institute of Purchasing and Supply (CIPS) purchasing managers index for the construction sector, activity slumped to 38.8 in June - the lowest recorded level since the inception of the survey in 1997.

A reading below 50 indicates contraction and the lower the reading the greater the contraction.

The reading is down from 43.9 in May, 56.0 at the end of 2007 and a peak of 64.8 in August 2007.

The index first dipped below the 50.0 level that indicates unchanged activity in March.

"Purchasing managers in the UK construction sector had little to celebrate in June, as activity in the industry fell at a record pace,' said Roy Ayliffe, director of professional practice at CIPS.

Once again it was the housing sector leading the decline.

The index for this sector dropped to a record low of 25.6 in June, down from 32.7 in May and 40.3 in April.

This is a massive 24.4 points below the 50.0 level that represents unchanged activity.

"Housebuilders are being hit extremely hard as housing market activity and house prices crumble in the face of elevated affordability pressures and very tight lending conditions," commented Howard Archer, chief economist with analysts Global Insight.

The CIPS report follows one released earlier in the day by the Royal Institution of Chartered Surveyors (Rics), which finds construction in the UK economy has fallen for the first time since 1995.

Rics now argues the government's housing targets are in jeopardy, following the marked slowdown in construction since the onset of the liquidity crisis.

Taylor Wimpey - the UK's largest housebuilder - also confirmed today it was to shed nearly 1,000 jobs as demand tumbled.

Chris O'Toole

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