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UK construction decline enters its third year

The UK’s construction activity decline passed passed the two year mark during February, but the rate of contraction held steady from the previous month according to the latest CIPS survey.

The construction purchasing managers’ index posted a score of 48.5 for construction activity during February with a score below 50 indicating decline.

The score was only fractionally lower than the previous month’s 48.6 signalling that the rate of contraction was broadly unchanged since January.

Housebuilding was the only sector to show a rise in activity. Residential construction has improved in each of the past six months, demonstrating a faster return to recovery than the other UK construction sectors.

In contrast, civil engineering based work contracted at the fastest pace of the three subsectors in February while the reduction in commercial construction activity was modest, and the weakest in six months.

Incoming new orders received by construction companies fell for a third successive month in February, although at only a marginal pace.

Opportunities to tender remained limited, reflecting the fragility of the current economic recovery. However, poor weather conditions and difficulties funding construction work also negatively impacted upon new business.

Employment in the UK construction industry continued to fall sharply. The latest decrease in staffing levels was faster than that reported in January.

Alongside capacity adjustments, anecdotal evidence suggested that construction companies were working on contracts which utilised fewer staff.

Meanwhile, expectations for activity levels in the next twelve months continued to rise.

Many panellists believed that the ongoing recovery in general economic conditions would boost the amount of opportunities to tender.

CIPS chief executive David Noble said: “While the UK economy slowly pulls into recovery mode, the construction sector has now been confined in recession territory for two years and is still very fragile.

“Though this was a relatively modest rate of contraction, tough operating conditions, dire weather and funding constraints dampened overall sector activity.

“Employment levels took another knock as contractors tried to keep overheads to a minimum.

“Even in the face of new contracts, firms made a conscious effort to utilise as few staff as possible to cope with the continuing barrage of bad news.

“Interestingly, widespread concerns that the general election fallout will result in significant spending cuts failed to dent future market expectations.

“Such a positive outlook, however, may only serve as a reflection of how difficult conditions currently are, rather than painting a picture of how good they will be in the future.”