Construction activity rises despite historic low

Tuesday, 3 February 2009 3:01 PM

Construction sector activity rose to its highest level for three months, according to the latest data.

However, although the CIPS/Markit UK Construction Purchasing Managers' Index (PMI) rose from 29.3 in December to 34.5 at the start of 2009, it still remained at a historically low level.

The weakest sector was again housing construction, with civil engineering showing the greatest resilience to the recession.

Output dropped steeply across all three monitored sub-sectors of the UK construction industry in January, although at slower rates than during December.

The contraction in incoming new work to UK constructors eased sharply in January, however, the rate of decline remained rapid. Low market confidence and demand, caused by the financial and economic crises, were mostly blamed for the latest decrease.

Roy Ayliffe, director of professional practice at the Chartered Institute of Purchasing & Supply, said: "Although Q1 opened with confidence amongst purchasing managers in the UK construction sector, it remained very subdued in comparison to historic data. This probably reflects the exceptional weakness of previous months more than any significant easing in the rate of contraction.

"As activity continued its downward spiral, firms were again forced to cull jobs.

"The remainder of this quarter will be important in ascertaining if the rise in the indices in January was an aberration or a real sign of a turning point in the cycle."

Both employment and sub-contractor usage took a considerable knock in January as new orders and activity fell. Some firms attempted to prevent larger cutbacks by reducing staff hours or shortening the working week.

As sub-contractor employment declined, their availability rose at the greatest extent in the data study's history. Despite this, the quality of sub-contractor work improved only moderately.

Despite poor business conditions, constructors were more optimistic in January looking towards the next year, with confidence at its highest for seven months. A number of firms held beliefs that the worst of the global credit and economic problems were behind them. That said, sentiment was still relatively subdued in comparison to general confidence levels before July 2008.

Gemma Wallace, economist at Markit Economics, said: "A number of UK constructors believed that they were over the worst in January, and were looking more hopefully towards the coming year than they have been in recent months. Although PMI data did signal some improvement in many indices, most remained at historically low levels (or, in the case of sub-contractor availability and supplier delivery times, historically high levels), which certainly provides no guarantee of the sector being on the road to recovery."

Tags:
• uk property news