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Firms shed staff as spending cuts loom

An increasing number of construction companies has been cutting staff ahead of this month’s comprehensive spending review, research has revealed.

Almost a quarter of the 170 firms surveyed for the latest Construction Purchasing Managers’ Index cut jobs in September - the largest number for six months.

Respondents to the poll, carried out by Markit and the Chartered Institute of Purchasing & Supply, said firms were continuing to reassess costs and resourcing needs in order to remain competitive.

The job cuts came against a backdrop of falling confidence about the recovery. The index showed that expectations were notably weaker during September, as concerns over public spending cuts grew.

While, on balance, activity was still expected to rise over the coming year, optimism fell to an 18-month low. In the past decade, confidence in the future has only been lower during the second half of 2008.

Construction firms reported a modest rise in incoming new business during September, with expansion now recorded for seven consecutive months.

However, the rate of increase eased for a fourth successive month to the slowest growth in the series, with some panellists indicating that new tender opportunities were diminishing.

CIPS chief executive David Noble said: “While the construction sector is still growing, a sharp fall in confidence suggests work in the pipeline may not be so strong.

“Not since the onset of the recession have we seen optimism in such short supply.”

It is widely expected that construction will suffer in the forthcoming public sector cuts, said Mr Noble. “Firms continue to nervously reassess their resourcing requirements, suggesting that staffing costs will be squeezed for the foreseeable future.”

More than 230,000 jobs were lost in the construction industry in the year to the end of March, according to the Office for National Statistics.
But the latest ONS figures showed strong demand for construction jobs in the second quarter of 2010. About 53,000 of the 72,000 jobs created during the three months were in the sector.

Economists say the growth stemmed from public sector orders placed towards the end of the Labour administration, which, they said, produced a “temporary surge” in part-time construction work.

Overall, the seasonally adjusted purchasing managers’ index for September stood at 53.8, up from 52.1 in August, where 50 marks no change on the previous month. The index is measured on a range of criteria, including new orders, employment and expectations.

This growth was led by increases in commercial and civil engineering - both of which grew faster than in August. Residential construction recorded a marked fall in activity, ending 12 months of growth.