UK construction sector is on a knife edge warns CIPS boss
Tentative ‘green shoots’, seen elsewhere in the economy, failed to reach the construction industry last month, although the decline in civil engineering activity was less than in any month since last September.
Overall, the Purchasing Managers’ monthly survey of construction gave an index number for activity of 44.5 per cent, on a scale where anything below 50 indicates a decline.
Nevertheless, that was only marginally down from a 12-month peak of 45.9 and a sharp improvement from the deeply depressed 27.8 recorded in February.
The worsening figure between May and June was confined to housing and commercial building.
The Chartered Institute of Purchasing & Supply (CIPS), which publishes the survey with Markit, said anecdotal evidence suggested that constructors are winning fewer orders as their clients tighten their spending budgets.
Falling demand continued to push down prices for raw materials and put constructors in a much better position to negotiate prices.
“The UK construction sector is on a knife edge,” said David Noble, chief executive of the CIPS.
“After the improvements seen in April and May, the sector has retracted as firms battle to consolidate their position in a tough market. This data adds to speculation of a ‘W-shaped’ recession.
“With conditions worsening, particularly in the housing and commercial sub-sectors, competition between firms remained fierce and many were forced to cull jobs again.
“Nonetheless, the sector is in better shape than at the start of the year.”
Paul Smith, senior economist at Markit, said the findings highlighted the fragility of the construction industry, although the rate of decline was much slower than in the early months of the year.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “Overall, the evidence suggests that the worst of the contraction is over for the construction sector, but it is still very fragile.”